First Coast Re IV Ltd. (Series 2023-1)

This First Coast Re IV Ltd. (Series 2023-1) catastrophe bond issuance marks a return from sponsor Security First Insurance Company, which is seeking to add more fully-collateralized and multi-year catastrophe reinsurance from the capital markets with what will be its fifth cat bond deal.

For its 2023 cat bond, the carrier has returned to Bermuda as a domicile for the issuance vehicle, it’s last two cat bonds having been issued out of Singapore.

First Coast Re IV Ltd. has been registered in Bermuda and will be licensed as a special purpose insurer (SPI) for issuing series of catastrophe bonds.

A single, currently $100 million, tranche of Series 2023-1 Class A notes will be issued by First Coast Re IV and sold to investors, with the proceeds used to collateralize the underlying reinsurance protection.

As with previous cat bonds from Security First, the company is working with global reinsurance firm Swiss Re, which will act as a ceding reinsurer and enter into a retrocession agreement with the issuer, First Coast Re IV Ltd.

In turn, Swiss Re will enter into a reinsurance agreement with Security First, to pass on the collateralized coverage, meaning the reinsurer therefore acts as a front to the capital markets for the Florida homeowners specialist.

The $100 million or more in notes issued by First Coast Re IV will provide Security First with a source of collateralized reinsurance protection against Florida named storms and severe thunderstorms, we understand.

We’re told the cat bond will feature an indemnity trigger and provide its coverage on a per-occurrence, but cascading basis.

That’s similar to Security First’s previous cat bond and ensures that the reinsurance will cascade down the tower if layers beneath are eroded, presumably meaning less chance of gaps being left in its protection.

The term of coverage will be three years, we understand, with maturity of the notes slated for April 2026.

The $100 million or more in Series 2023-1 Class A notes will come with an initial attachment probability of 1.36%, an initial base expected loss of 1.25% and are being offered to cat bond funds and investors with spread guidance in a range from 10% to 11%, sources said.

Update 1:

The target size for Security First’s new First Coast Re IV catastrophe bond remains at $100 million.

However, the price guidance has been lowered, with a new target for a spread of between 9.5% and 10% for this issuance.

Update 2:

The price guidance was reduced again, to between 9% and 9.5%.

Update 3:

At pricing, the $100 million First Coast Re IV Series 2023-1 Class A notes were fixed to pay investors a spread of 9%, so the lowest-end of the twice reduced guidance and a roughly 14% drop in spread from the initial mid-point.