Greengrove Re Ltd. (Series 2025-1)

Sutton National Group, an insurance group that underwrites through its Sutton National Insurance Company and E&S carrier Sutton Specialty Insurance Company, often in partnership with MGA’s on a program basis, has entered the catastrophe bond market in search of reinsurance protection against fires in the state of California.

In this case program administrator Bamboo Ide8 Insurance Services, LLC produces the subject business for Sutton National Group’s underwriting entities and Bamboo is the sole producer for Sutton’s admitted homeowners’ business in California, we are told.

Greengrove Re Ltd. has been established in Bermuda for the issuance of series of catastrophe bond notes and a single Series 2025-1 tranche of Class A notes is being offered to investors in this case.

The currently $75 million of Greengrove Re Series 2025-1 Class A notes are designed to provide ceding entities Sutton National Insurance Company and Sutton Specialty Insurance Company with a three-year source of indemnity and per-occurrence based reinsurance running from April 1st this year, sources said.

But most interestingly the covered region and perils for this catastrophe bond are set to be California and wildfires as well as fires following earthquake events. We understand other states can be added to the coverage after a reset, should the sponsor so choose.

Given the recency of the Los Angeles wildfire event in January 2025, it is going to be intriguing to see how cat bond investors respond to what is a rare opportunity, given wildfire risks do not feature in the catastrophe bond market very frequently at this time.

We understand that the reinsurance protection from these Greengrove Re 2025-1 cat bond notes would attach at $150 million of losses and exhaust their coverage at $250 million, leaving some room for the $75 million issuance to upsize should their prove to be appetite from investors for the peril.

The $75 million of Class A notes come with an initial attachment probability of 2.1%, an initial expected loss of 1.44% and are being offered to cat bond investors with price guidance in a range from 7.5% to 8%.

We’re told there is also a sensitivity case expected loss, which takes into account wildfire subrogation potential and that models out the EL to a lower 1%, we understand.

Update 1:

We understand that Sutton National is now looking to upsize its debut Greengrove Re 2025-1 catastrophe bond by one-third, with now $100 million of fire reinsurance the target.

At the same time the price guidance has narrowed towards the upper-end of guidance, being updated to between 7.75% and 8%.

Update 2:

Sutton National eventually secured the upsized target of $100 million of fire reinsurance for the state of California from this Greengrove Re 2025-1 catastrophe bond.

The notes eventually priced to pay investors a spread of 7.75%, so at the mid-point of the initial guidance range.