Gateway Re Ltd. (Series 2024-2)

For this latest catastrophe bond under the Gateway Re series of deals for underwriting entities linked to MGU SageSure, second and subsequent event reinsurance is being sought for the SureChoice Underwriters Reciprocal Exchange and the Elevate Reciprocal Exchange.

Gateway Re Ltd., the Bermuda domiciled SPI, will issue a single Class C tranche of Series 2024-2 cat bond notes, with a target for between $100 million and $130 million of second-event reinsurance for the reciprocal exchanges.

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

The Class C Series 2024-2 notes that Gateway Re Ltd. will issue are designed to cover the reciprocals against losses from named storms affecting the US states of Alabama, Florida, North and South Carolina, Louisiana, Mississippi, and Texas, on an indemnity, per-occurrence basis, for second and subsequent event losses.

The notes will only provide their protection across a single hurricane season, coming on-risk after issuance in April and running until December 15th, we are told.

The up to $100 to $130 million of notes would attach from $110 million of losses, covering up to $240 million and have an aggregate deductible of the size of that layer, at the $130 million amount (hence a full covered event needs to be seen before this second and subsequent coverage kicks in).

The Class C notes will have an initial attachment probability of 1.99%, an initial expected loss of 1.23% and are being offered with price guidance of 90.5% to 91.5% of par, so are being structured as zero-coupon notes. That is a rough spread equivalent of 8.5% to 9.5%.

Update 1:

We’re now told that this cat bond looks set to achieve the upper-target size of $130 million of reinsurance for the sponsors.

At the same time, the price guidance has been lowered, to between 91.5% and 92% of par, which indicates a reduction to a rough spread equivalent of 8% to 8.5%.

Update 2:

This cat bond was finalised to provide $130 million of second and subsequent event reinsurance to cedents SureChoice Underwriters Reciprocal Exchange and Elevate Reciprocal Exchange.

The notes priced at 91.75% of par, which represents a rough spread equivalent of 8.25%, so below the initially marketed guidance.