Luca Re Ltd. (Series 2026-1)

Mercury General Corporation, (Mercury Insurance), the California headquartered insurance company, has returned to the catastrophe bond market to sponsor its second 144A issuance, seeking additional wildfire reinsurance protection from the capital markets.

The company is again utilising its Luca Re Ltd. special purpose insurer (SPI) based in Bermuda for its second cat bond.

Luca Re Ltd. is offering a currently $100 million tranche of Series 2026-1 Class A notes, that will be sold to investors and the proceeds used to collateralize a reinsurance agreement between the SPI and Mercury underwriting entities.

We’re told the Luca Re 2026-1 cat bond notes will provide reinsurance to protect Mercury’s losses under the same range of subsidiaries as its first cat bond, being Mercury Casualty Company, Mercury Insurance Company, California Automobile Insurance Company and California General Underwriters Insurance Company, Inc.

The $100 million or more in Series 2026-1 notes that Luca Re is offering are designed to provide Mercury with a roughly three-year source of collateralized reinsurance protection against wildfire and fire-following earthquake losses in the state of California, again the same as the first deal.

The notes will provide their reinsurance on an indemnity trigger and per-occurrence basis, again like the first Luca Re cat bond.

We’re told the notes will have an initial attachment point of $1.75 billion and cover a share of losses up to $2 billion, suggesting there is room for this second cat bond from Mercury to upsize to as much as $250 million if investor appetite supported it.

The currently $100 million of Series 2026-1 Class A notes that Luca Re is offering to investors come with an initial attachment probability of 1.23%, an initial expected loss of 1.09% and are being offered with price guidance for an initial risk interest spread in a range from 6.25% to 6.75%, we are told by sources.