Citrus Re Ltd. (Series 2024-1) – Full details:
Heritage Insurance Holdings, Inc. is back in the catastrophe bond market seeking $100 million or more in southeast US named storm reinsurance protection from this Citrus Re Ltd. (Series 2024-1) issuance.
This new Citrus Re 2024-1 catastrophe bond is now the ninth issuance under the Citrus name, that Heritage has sponsored and we have listed in our extensive cat bond Deal Directory.
This new cat bond from Heritage sees the company seeking protection for its own book under cedent Heritage Property & Casualty Insurance Company, as well as that of subsidiary Narragansett Bay Insurance Company (NBIC), we understand.
Citrus Re Ltd., Heritage’s Bermuda based special purpose insurer (SPI), will seek to issue two tranches of notes, that will be sold to investors and the proceeds used to collateralize reinsurance agreements for the cedents benefit.
The Citrus Re Series 2024-1 cat bond notes are targeted to provide Heritage and its subsidiary with a multi-year source of southeast US named storm reinsurance protection, on an indemnity trigger and per-occurrence basis, across a three-year term from June 1st 2024 to June 2027, we are told.
The named storm and hurricane reinsurance protection will initially be for the US states of Alabama, Florida, Georgia, Mississippi, North Carolina and South Carolina, but the coverage area can be expanded to also include Maryland and Virginia at a future update, it is said.
A currently $50 million tranche of Class A notes would attach at $700 million of losses and exhaust their reinsurance coverage at $800 million, giving them an initial attachment probability of 1.38%, an initial expected loss of 1.29% and these notes are being offered to investors with spread guidance in a range from 9% to 9.75%, sources said.
A similarly $50 million Class B tranche of notes are riskier, with an attachment point at $560 million of losses and exhaust their reinsurance coverage at $700 million, so sitting beneath the Class A notes, which gives them an initial attachment probability of 1.64%, an initial expected loss of 1.5% and these notes are being offered to investors with spread guidance in a range from 10% to 10.75%, we understand.
We are told these notes will sit at the top of Heritage’s southeast US reinsurance tower and there is room for each class of notes to grow, given they would currently only occupy a share of each layer at $50 million in size.
Update 1:
Heritage’s target for this new Citrus Re 2024-1 catastrophe bond remains at $100 million, we understand.
However, the price guidance has been updated, with the $50 million Class A notes now offered with a spread of 9.25% and the $50 million Class B notes with a spread of 10.5%, so both looking set to price within the initial guidance ranges.
Update 2:
At final pricing, Heritage secured the targeted $100 million of reinsurance across the two tranches of notes from this Citrus Re 2024-1 catastrophe bond.
The $50 million of Class A notes priced to pay investors 9.25% and the $50 million of Class B notes priced to pay investors 10.5%, so both tranches were priced within the initial spread guidance ranges.
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