Everglades Re II Ltd. (Series 2025-1)

Florida’s Citizens Property Insurance Corporation has returned to the catastrophe bond market and has set a significant initial target for $975 million of fully-collateralized and multi-year reinsurance protection against named storm and hurricane risks in the state.

This will be the sixteenth series of catastrophe bonds sponsored by Florida Citizens that we have analysed and listed in our Deal Directory, while it is the fourteenth series sponsored by Citizens under a cat bond issuer that uses the Everglades Re name.

Bermuda based special purpose insurer (SPI) Everglades Re II Ltd. is aiming to issue four tranches of Series 2025-1 notes, each to collateralize a three-year source of reinsurance for Florida Citizens.

All four tranches of notes being offered to catastrophe bond funds and investors will provide the Floridian property insurer of last resort with multi-year annual aggregate named storm reinsurance for the state of Florida, on an indemnity trigger basis, we understand.

The coverage will run from the date of issuance in May for a three year term, across three annual aggregate risk periods.

All four tranches are structured to sit on top of each other in the Florida Citizens reinsurance tower, each sharing layers with traditional reinsurance and also with the insurer’s industry-loss based Lightning Re catastrophe bond.

Everglades Re II is offering a $275 million tranche of Series 2025-1 Class A notes that would attach their coverage at $9.6 billion of losses and exhaust it at $10.8 billion, giving them an initial attachment probability of 1.72%, an initial base expected loss of 1.56% and they are being offered to investors with spread price guidance in a range from 8.75% to 9.5%, we understand.

An also $275 million tranche of Series 2025-1 Class B notes would attach their coverage at $8.4 billion of losses and exhaust it at $9.6 billion (so the next layer down), giving them an initial attachment probability of 2.07%, an initial base expected loss of 1.90% and they are being offered to investors with spread price guidance in a range from 9.75% to 10.5%.

A further $275 million tranche of Series 2025-1 Class C notes sit beneath and would attach their coverage at $7.2 billion of losses and exhaust it at $8.4 billion (so the next layer down), giving them an initial attachment probability of 2.60%, an initial base expected loss of 2.32% and they are being offered to investors with spread price guidance in a range from 11% to 11.75%, sources said.

A final $150 million tranche of Series 2025-1 Class D notes will sit lowest down, attaching their coverage at $6.489 billion of losses and exhausting it at $7.2 billion, giving them an initial attachment probability of 3.02%, an initial base expected loss of 2.80% and they are being offered to investors with spread price guidance in a range from 12.5% to 13.5%.

Update 1:

Florida’s Citizens Property Insurance Corporation is now targeting up to $1.4 billion in named storm reinsurance protection for this cat bond, which would make it the second largest cat bond ever.

The Class A tranche of notes are now targeting a size of $400 million to $450 million.

The Class B tranche of notes are now targeting a size of $350 million to $400 million.

The Class C tranche of notes are now targeting a size of $300 million to $350 million.

The Class D tranche of notes ate now targeting a size of $150 million to $200 million.

We’ve also learned that spread price guidance has been updated for all four tranches of notes for this cat bond.

For the Class A tranche of notes, initially being offered to investors with spread price guidance in a range from 8.75% to 9.5%, spread guidance has fallen towards the low-end of that range at 8.75%.

For the Class B tranche of notes, initially being offered to investors with spread price guidance in a range from 9.75% to 10.5%, spread guidance has fallen towards the low-end of that range at 9.75%.

For the Class C tranche of notes, initially being offered to investors with spread price guidance in a range from 11% to 11.75%, are now being pitched towards the lower-end at 11.25%.

Finally, for the Class D tranche of notes, initially being offered to investors with spread price guidance in a range from 12.5% to 13.5%, price guidance has now shifted towards the mid-point of that range at 13%.

Update 2:

Florida Citizens raised its target size for this cat bond again, with between $1.4 billion and $1.525 billion of reinsurance limit being sought. At the upper-end, that would make this the largest catastrophe bond ever issued.

At this latest update, the Class A tranche of notes which have an initial expected loss of 1.56% are targeted at $450 million in size, with price guidance of 8.75%, the low-end of initial guidance.

The Class B tranche of notes which have an initial expected loss of 1.90% are targeted at $400 million to $475 million in size, with price guidance of 9.75%, again the low-end of initial guidance.

The Class C tranche of notes which have an initial expected loss of 2.32% are now targeted at between $350 million and $375 million in size, with price guidance of 11.25% which is in the lower-half of initial guidance.

Finally, the Class D tranche of notes which have an initial expected loss of 2.80% are now targeting between $200 million and $225 million in limit, with price guidance of 13%, which is at the mid-point of initial guidance.

Update 3:

Florida Citizens secured the 56% upsized $1.525 billion of reinsurance limit from this new Everglades Re II 2025-1 cat bond, making this the largest catastrophe bond ever issued at the time.

The Class A tranche of notes, which have an initial expected loss of 1.56%, were finalised to provide $450 million of reinsurance (up from the initial $275m target) and have priced to pay investors a spread of 8.75%, which is the low-end of initial guidance.

The Class B tranche of notes, which have an initial expected loss of 1.90%, have been finalised to provide Citizens $475 million  of reinsurance (up from the initial $275m target) and have priced to pay investors a spread of 9.75%, again the low-end of initial guidance.

The Class C tranche of notes, which have an initial expected loss of 2.32%, have been finalised to provide Citizens $375 million in reinsurance (up from the initial target of $275m) and priced to pay investors a spread of 11.25% which is in the lower-half of the initial guidance range.

The final Class D tranche of notes, which have an initial expected loss of 2.80%, have been finalised to provide $225 million in reinsurance (up from the initial target of $150m) and priced to pay investors a spread of 13%, which is at the mid-point of initial guidance.