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Citrus Re Ltd. (Series 2022-1)

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Citrus Re Ltd. (Series 2022-1) – At a glance:

  • Issuer: Citrus Re Ltd.
  • Cedent / sponsor: Heritage Property and Casualty Insurance Co.
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: US named storm (initially Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Rhode Island, Virginia)
  • Size: $100m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Apr 2022

Citrus Re Ltd. (Series 2022-1) – Full details:

This is the first catastrophe bond from Heritage Insurance Holdings since 2017. The company first visited the cat bond market in 2014, but made relatively significant reinsurance recoveries from a number of its cat bonds after the 2017 hurricane season and had not returned to sponsor a new cat bond until now, March/April 2022.

Heritage acquired Narragansett Bay Insurance Company (NBIC) back in 2017 and the company is named as a cedent for this new catastrophe bond, alongside Heritage’s P&C insurance entity and its Hawaii based insurer Zephyr.

But the Citrus Re Series 2022-1 catastrophe bond will initially only cover north-east US named storm risks, across the named states of Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Rhode Island and Virginia, which are the states where insurer Narragansett Bay operates.

As ever, Heritage can elect to include a broader range of states under this cat bonds reinsurance cover at resets, but that will never include south-east and Gulf states, which are named as Florida, Alabama, Louisiana, Texas and Mississippi, we’re told.

So this new cat bond to be issued by Heritage’s Citrus Re Ltd. special purpose insurer in Bermuda is to all intents a north-east US wind cat bond, at least to begin.

Citrus Re Ltd. will issue a single currently $100 million tranche of Series 2022-1 Class A notes, that will be sold to cat bond investors and the proceeds used to collateralize a reinsurance agreement with the company.

The $100 million or more of protection will cover losses from named storms across those named north-east US states, on a per-occurrence and indemnity trigger basis, across a term that runs to June 2025, so covering three full US hurricane seasons, sources told Artemis.

We’re told the Class A notes would attach at $390 million of losses and cover a share up to exhaustion at $760 million, which gives them an initial attachment probability of 1.95% and an initial expected loss of 1.57%.

The $100 million or more of Series 2022-1 Class A notes being issued by Citrus Re Ltd. are being offered to investors with coupon price guidance in a range from 4.25% to 5%, we understand.

Update 1:

This cat bond from Heritage has not upsized, so remains at $100 million.

The pricing was finalised at a raised level though, to provide a 5.1% coupon to investors, so above the top-end of initial guidance.

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