Gateway Re Ltd. (Series 2024-4)

This is the second catastrophe bond in the Gateway Re series of deals that will provide protection to coastal property managing general underwriter SageSure’s carrier entities on a county-weighted, index-trigger and retrocessional basis.

It becomes the ninth in the Gateway Re series of deals for entities linked to SageSure.

The named cedents are SageSure’s captive reinsurance vehicle Anchor Re, the SureChoice Underwriters Reciprocal Exchange (SURE) and Elevate Reciprocal Exchange, where as a similar index-trigger deal from SageSure in 2023 was for Anchor Re only.

Gateway Re Ltd. will issue a $50 million or greater tranche of Series 2024-4 Class A notes to provide a source of collateralized retrocessional reinsurance to Anchor Re, SURE and Elevate.

Anchor Re operates as a reinsurance captive to SageSure’s carriers, so effectively the coverage will span much of the MGU’s book it seems, but this year’s deal explicitly names the two reciprocals as cedents as well.

The cat bond will provide SageSure’s reciprocal carriers and Anchor Re, with a source of US named storm retrocessional reinsurance protection across just the coming hurricane season, with the risk period over at the end of 2024, we are told.

That’s different to last year’s deal, which was a three-year county weighted cat bond for SageSure.

Once again though, the retro reinsurance protection from this Gateway Re 2024-4 cat bond is structured on an industry-loss index and annual aggregate basis, with the industry loss index county-weighted and so just the second time PCS county-level catastrophe loss reporting has been utilised in a cat bond trigger, as far as we can tell.

The index will be based on reported personal, commercial and auto lines losses and the there will be a franchise deductible of $5m per-event and a loss cap for single events that is the same as the attachment level.

That loss cap means a major hurricane can only contribute index points up to the attachment level, meaning a second event would be required for principal losses to occur, it seems.

The US named storm protection will cover county-weighted industry loss events in the states of Alabama, North and South Carolina, Louisiana, Mississippi, Texas, Virgina, and New York, the same set of states as last year’s deal.

The $50 million of Series 2024-4 Class A notes that Gateway Re Ltd. is seeking to issue will come with an initial attachment probability of 5.65%, an initial base expected loss of 2.22% and this year the notes are zero-coupon in nature and offered with price guidance in a range from 84% to 85% of par, so a rough 15% to 16% spread equivalent.

Update 1:

Sources told us that the target size for this new Gateway Re 2024-4 catastrophe bond has been lifted by $10 million to now $60 million of protection being sought.

At the same time, the pricing has been fixed at 84% of par, so effectively the upper-end of guidance, which is a rough equivalent to a 16% spread, we are told.