Lower Ferry Re Ltd. (Series 2023-1)

This is a second catastrophe bond for sponsor New Jersey Manufacturers Insurance Company, more commonly now known as NJM Insurance Group, an American mutual insurance group of companies, offering auto and property lines of coverage across certain states in the Northeast US.

The company is set to use a Bermuda domiciled vehicle named Lower Ferry Re Ltd. for its second catastrophe bond, with that company set to issue two tranches of notes to collateralize reinsurance agreements to cover NJM Insurance.

The target size is at least $175 million for the issuance and this will provide a source of multi-year US named storm reinsurance protection across the Northeast US states of New Jersey, Pennsylvania, Delaware, New York, Connecticut, Maryland and Ohio.

The reinsurance protection from this Lower Ferry Re 2023-1 cat bond will cover NJM Insurance across a three-year term, to the end of June 2026, on an indemnity and per-occurrence basis, we understand.

The offering includes a $50 million Class A tranche of notes, that would attach at $600 million of losses and exhaust their coverage at $800 million, giving them an initial attachment probability of 1.03%, a base expected loss of 0.88% and they are being offered with price guidance indicating a spread of between 4.25% and 4.75%.

While a $125 million Class B tranche are riskier, attaching at $300 million and exhausting where the Class A tranche attaches, at $600 million of losses, giving an initial attachment probability of 1.93%, a base expected loss of 1.36% and they are being offered with price guidance indicating a spread of between 4.75% and 5.5%.

Update 1:

We’re told the target size has been increased to as much as $225 million for this Lower Ferry Re cat bond for NJM Insurance.

What was a $50 million Class A tranche of notes are now pitched at up to $75 million in size, we understand, while the price guidance has been narrowed to 4.25% to 4.5%.

What was a $125 million Class B tranche are now pitched at up to $150 million in size, while their pricing has been fixed at 5%, we are told.

Update 2:

We’ve now learned that the Lower Ferry Re catastrophe bond issuance will be finalised at $190 million in size, as the sponsor NJM Insurance seemingly looked to optimise size versus pricing.

The Class A tranche of notes will be $65 million in size and priced at the low-end of guidance, for a spread of 4.25%.

The Class B tranche will be $125 million in size, so the original target size, with their spread still fixed at the 5% price.