Everglades Re II Ltd. (Series 2023-1 & 2023-2)

Florida’s Citizens Property Insurance Corporation is back in the catastrophe bond market with a dual-series issuance of notes under its Everglades Re II Ltd. vehicle, seeking collateralized reinsurance for both its Coastal and Personal Lines Accounts, but only to cover the upcoming wind season.

As anticipated, the insurer is now back with a dual-series of Everglades Re II Ltd. notes on offer to cat bond investors, although these are being issued as discount notes (to the original principal amount), so without a coupon and more akin to zero-coupon, we’re told.

The target is to secure $200 million or more of collateralized named storm reinsurance from the capital markets, to provide cover to the Florida Citizens Coastal and Personal Lines Accounts, with one Series of notes targeted for each Account.

Both Series of notes being issued will provide Florida Citizens with named storm reinsurance protection, on an indemnity and annual aggregate basis, but only until January 8th 2024 we understand.

This is because Florida Citizens is set to merge its three accounts (Coastal Account, Personal Lines Account and Commercial Lines Account) into a single Citizens Account, effectively transitioning its reinsurance structure from three towers into a single one for future years.

So these cat bonds are being issued as zero-coupon for this reason, as they are only set to be on-risk for a single wind season, it seems.

A Series 2023-1 Class A tranche of notes are sized at $100 million, to provide aggregate reinsurance to the Citizens Coastal Account, which encompasses personal and commercial residential wind and multi-peril policies, we’re told.

The Series 2023-1 Class A notes will cover Citizens for losses from an attachment point of $4.01 billion, exhausting at $5.18 billion, giving them an initial attachment point of 1.92%, an initial base expected loss of 1.59% and these notes are being offered with price guidance in a range from 88.25% to 88.75% of the original principal (a rough 11.25% to 11.75% equivalent to a rate-on-line or coupon).

A Series 2023-2 Class A tranche of notes are sized at $100 million, to provide aggregate reinsurance to the Citizens Personal Lines Account, which only features personal residential multi-peril policies, we understand.

The Series 2023-2 Class A notes will cover Citizens for losses from an attachment point of $6.486 billion, exhausting at $9.491 billion, giving them an initial attachment point of 1.23%, an initial base expected loss of 0.92% and these notes are being offered with price guidance in a range from 89.5% to 90% of the original principal (a rough 10% to 10.5% equivalent to a rate-on-line or coupon).

Update 1:

Florida Citizens has significantly increased its target size for these new catastrophe bonds, with as much as $600 million in reinsurance now sought across the two series of notes on offer.

At a minimum this looks likely to more than double this issuance, but possibly triple it, with between $425 million to as much as $600 million of reinsurance now being sought.

The Series 2023-1 Class A tranche of notes began at $100 million but are now being offered at between $175 million and $250 million

We’re now told that the Series 2023-1 Class A notes price guidance has been narrowed to 88.50% to 88.75% (a rough 11.25% to 11.5% spread range).

The Series 2023-2 Class A tranche of notes were also originally sized at $100 million, but we understand this to have been lifted to between $250 million and $350 million.

Sources said the Series 2023-2 Class A notes price guidance has also been narrowed to 89.75% to 90% (a rough 10% to 10.25% equivalent to a rate-on-line or coupon).

Update 2:

Florida’s Citizens Property Insurance Corporation has upsized its target for its latest catastrophe bond issuance for a second time, with now up to $775 million of protection sought from the dual-series issuance.

According to sources, Florida Citizens is now looking to secure between $650 million and $775 million of one-year reinsurance protection with these catastrophe bonds.

We’re now told that the Series 2023-1 Class A notes that will provide aggregate reinsurance to the Citizens Coastal Account are sized at between $250 million and $300 million, while their pricing has now been fixed at 88.625% of principal, a roughly 11.375% rate-on-line or coupon equivalent.

The Series 2023-2 Class A tranche of notes that will provide aggregate reinsurance to the Citizens Personal Lines Account are now sized at between $400 million and $475 million, while their pricing has been fixed at 89.875% of principal, a roughly 10.125% rate-on-line or coupon equivalent.

Update 3:

Florida’s Citizens Property Insurance Corporation eventually settled for $750 million in reinsurance from its latest catastrophe bond issuance.

The Series 2023-1 Class A notes, that will provide aggregate reinsurance to the Citizens Coastal Account, have been finalised at $300 million in size.

The Series 2023-1 Class A notes for the Coastal Account have an initial base expected loss of 1.59% and priced at 88.625% of principal, a roughly 11.375% rate-on-line or coupon equivalent.

The Series 2023-2 Class A tranche of notes, that will provide aggregate reinsurance to the Citizens Personal Lines Account, were finalised to provide $450 million of protection.

The Series 2023-2 Class A notes, for the Personal Lines Account, have an initial base expected loss of 0.92% and priced at 89.875% of principal, a roughly 10.125% rate-on-line or coupon equivalent.