Gateway Re Ltd. (Series 2024-1)

This is the first catastrophe bond of 2024 for underwriting entities linked to SageSure Capital Holdings Inc., which writes business using two reciprocal exchanges, the SureChoice Underwriters Reciprocal Exchange (SURE) and Elevate Reciprocal Exchange and these are the cedents to this Gateway Re Ltd. (Series 2024-1) cat bond.

We understand that Gateway Re Ltd., a Bermuda domiciled SPI, will issue two tranches of Series 2024-1 cat bond notes, with a target for between $100 million and $200 million of reinsurance across the two layers.

These notes will be sold to catastrophe bond funds and investors, while the proceeds will be used to collateralize reinsurance agreements between the SPI and the ceding entities which are the SureChoice Underwriters Reciprocal Exchange and the Elevate Reciprocal Exchange.

The two tranches of Series 2024-1 notes issued by Gateway Re Ltd. will cover the reciprocals against losses from named storms affecting the US states of Alabama, North and South Carolina, Louisiana, Mississippi, and Texas.

We’re also told that at a reset, additional states of New York and Virgina can be added, at the cedents request.

The notes will provide the cedents with indemnity trigger and per-occurrence structured named storm reinsurance, with one tranche providing one wind season of protection, the other offering the reciprocal exchanges three seasons of coverage.

The two tranches of notes are targeted to secure at least $50 million of coverage each, but the entire issuance targets between $100 million and $200 million in reinsurance, we understand.

The first Class AA tranche of notes will run up to a due date of July 8th 2027 we understand, and their reinsurance would attach at $1.22 billion of losses, exhausting at $1.35 billion.

Which gives the Class AA notes an initial attachment probability of 1.19%, an initial expected loss of 1.1%, while they are being offered to cat bond investors with spread guidance in a range from 6.25% to 7%, we are told.

The second Class A tranche of notes will only provide reinsurance for a single wind season, running to December 23rd 2024, with their coverage attaching at $535 million of losses and exhausting at $715 million.

The Class A notes have an initial attachment probability of 1.91%, an initial expected loss of 1.47%, but are structured as zero-coupon bonds and offered to cat bond investors with price guidance in a range from 90.75% to 91.75% of par (representing a rough spread equivalent of 8.25% to 9.25%).

Update 1:

We understand the target size for this issuance has been increased, with up to $250 million of named storm reinsurance sought across the two tranches of notes on offer.

The Class AA tranche of notes are now targeted to be a $75 million to $100 million issuance, while their price guidance has been lowered to a new range of 5.5% to 6.25%.

The second one-year Class A tranche of zero-coupon notes are targeted at between $100 million and $150 million in size, while their spread guidance has also been lowered, with a range of 92.5% to 91.75% of par pricing offered (representing an updated rough spread equivalent of 7.5% to 8.25%).

Update 2:

The upsized target of $250 million of named storm reinsurance was secured for this latest SafeSure linked cat bond issuance.

The Class AA tranche of notes will settle at $100 million in size, while their pricing was finalised at 5.5%, so the bottom end of the reduced range.

The second one-year Class A tranche of zero-coupon notes will settle at $150 million in size, while their price finalised at 92.5% of par, so again the bottom of the reduced range, representing a rough spread equivalent of 7.5%.