Chartwell Re Ltd. (Series 2025-1)

This is the first Rule 144A catastrophe bond issuance for sponsoring coastal specialist insurers U.S. Coastal Insurance Company and U.S. Coastal Property & Casualty Insurance Company.

The two insurers are administered by hurricane exposed property insurance specialist Cabrillo Coastal General Insurance Agency, part of Cabrillo Holdings, LLC, with Cabrillo’s owners the major stakeholders in the companies, while we understand RenaissanceRe Ventures also owns a stake.

Chartwell Re Ltd. has been established in Bermuda for the issuance of catastrophe bonds to benefit the insurers, as they look to expand their capital markets backed reinsurance protection.

US Coastal has previously been known as a buyer of collateralized reinsurance from insurance-linked securities (ILS) markets and also the beneficiary of private cat bonds.

This Chartwell Re Ltd. Series 2025-1 catastrophe bond is the first full Rule 144A issuance to be sponsored by the US Coastal insurers.

Chartwell Re Ltd. will offer three tranches of Series 2025-1 cat bond notes to investors, with a target to secure $310 million of fully-collateralized reinsurance for the US Coastal insurers, we understand from sources.

The Chartwell Re Series 2025-1 notes will provide the two US Coastal insurers sponsoring the deal with indemnity trigger, per-occurrence catastrophe reinsurance to protect the companies against named storm losses.

The covered area are the hurricane exposed states the two insurers underwrite business in, which are said to be: Alabama, Florida, Mississippi, New Jersey, New York, Rhode Island, and Texas.

It’s worth noting that our sources said certain counties in New York contribute the greatest shares of expected loss to the deal, while states like Florida are lower, which reflects the concentrations in that state US Coastal Insurance writes.

The Chartwell Re Series 2025-1 cat bond notes will provide the sponsors with three years of reinsurance, running from June 1st this year, we are told.

We understand that the three tranches of notes effectively sit on top of each other in the reinsurance tower, with FHCF coverage inuring to the lower layer of notes, which then inures to the one above, and so on. So while the attachment points appear the same, the effective attachments, in ultimate loss terms, are commensurately higher for each and stacked in tranche order, it seems.

Chartwell Re will issue a $150 million Series 2025-1 Class A tranche of notes that have an initial attachment point at $120 million and exhaust at $290 million, giving them an initial attachment probability of 1.95%, an initial expected loss of 1.46%, while they are being offered with price guidance in a range from 6.25% to 6.75%.

Next, a $100 million Series 2025-1 Class B tranche of notes have an initial attachment point at the same $120 million and exhaust at $220 million, giving them an initial attachment probability of 3.01%, an initial expected loss of 2.36%, while they are being offered with price guidance in a range from 7.5% to 8.25%.

Finally, a $60 million Series 2025-1 Class C tranche of notes have an initial attachment point at the same $120 million and exhaust at $180 million, giving them an initial attachment probability of 4.28%, an initial expected loss of 3.6%, while they are being offered with price guidance in a range from 9.75% to 10.75%.

Notably, this also is the first catastrophe bond issuance we’ve ever analysed that features BMS Capital Solutions & Advisory working in a service provider role.

In this case, the investment banking and capital markets arm of broker BMS Re is a joint-structuring agent and bookrunner, alongside Swiss Re Capital Markets.

Update 1:

We’re now told the target issuance size for this first Chartwell Re 2025-1 catastrophe bond for Cabrillo’s US Coastal insurers has increased to $330 million.

At this latest update, the Class A tranche of notes that are being offered by Chartwell Re have grown from $150 million to now a $170 million target size. The price guidance has also dropped, with a new range of 5.75% to 6.25%.

The still $100 million Series 2025-1 Class B tranche of notes are now being offered with an updated price guidance range of 7.00% to 7.50%.

And finally, the still $60 million Series 2025-1 Class C tranche of notes are being offered with an updated price range of 9.25% to 9.75%.

Update 2:

We understand that the Chartwell Re 2025-1 catastrophe bond for Cabrillo’s US Coastal insurers has now been finalised to provide the upsized target of $330 million of named storm reinsurance protection for the sponsors.

The Class A tranche of notes upsized from $150 million to $170 million in size and priced for a spread of 6% to be paid, so below the initial range.

The Class B tranche of notes remained at $100 million in size and final pricing was for a spread of 7%, so again below the initial range.

The $60 million Series 2025-1 Class C tranche of notes also did not change in size and we’re now told final pricing was for a spread of 9.25% to be paid, again below the initially offered range.