High Point Re Ltd. (Series 2023-1)

This is the first catastrophe bond that US insurer Selective Insurance Company has sponsored, as the company turns to a fully securitized Rule 144a capital markets backed source of reinsurance for the first time.

Selective is seeking a $200 million catastrophe bond to add to its reinsurance arrangements, with High Point Re Ltd. recently registered in Bermuda to be the issuer of its debut cat bond deal.

For its Selective Insurance Company entity, the firm is seeking to sponsor the issuance of a single tranche of Series 2023-1 cat bond notes, to provide it with multi-year and multi-peril reinsurance protection.

The cat bond notes that High Point Re Ltd. will issue are designed to provide Selective with a three year source of reinsurance to the end of 2026, covering it against losses from U.S. named storms, earthquakes, severe thunderstorms, winter storms, wildfires, meteorite impacts and volcanic eruptions, we understand.

We’re told that the High Point Re cat bond covered area is across the United States, except for the key cat exposed states of California, Florida, Louisiana and Texas.

The coverage will be on an indemnity and per-occurrence basis, sources said, with the $200 million or greater tranche of Class A notes attaching their reinsurance protection from a $700 million loss and covering a share of losses up to $1.2 billion for Selective.

This means the High Point Re Series 2023-1 Class A cat bond notes will come with an initial attachment probability of 1.13%, an initial base expected loss of 0.77% and we understand they are being offered to investors with spread price guidance in a range from 5% to 5.75%.

Despite this cat bond excluding the key wind exposed states of Florida, Louisiana and Texas, we are told that named storms contribute the majority, over 90%, of the expected loss to the notes.

Update 1:

We’re now told that the target size for Selective’s first cat bond issuance has been increased significantly, with the deal’s proposed size now lifted to between $300 million and $325 million.

Sources said that the price guidance the enlarged tranche of notes are being offered with, has now been fixed at the top-end of the initial range, for a spread of 5.75% to be paid to investors.

Update 2:

At pricing, Selective secured the 62.5% increase in size of its first catastrophe bond, with the High Point Re 2023-1 deal providing it $325 million of multi-peril catastrophe reinsurance, while the spread paid to investors was finalised at 5.75%, so the top of initial price guidance.