Merna Re II Ltd. (Series 2024)

US primary insurer State Farm has been back in the catastrophe bond market and we’re told has secured $1 billion of reinsurance through this Series 2024-1, 2024-2 and 2024-3 issuance from its Merna Re II Ltd. vehicle.

Details are limited with this latest Merna Re II 2024 catastrophe bond from State Farm being marketed to a group of investors and not as broadly offered as most cat bond deals are these days.

We’re told that State Farm has continued to adopt its strategy for semi-private, or club based issuances in the catastrophe bond market.

At $1 billion in size, this is now the second largest catastrophe bond issuance in State Farm’s long history of tapping this marketplace.

We are told that for this latest cat bond, State Farm is again using its Merna Re II Ltd. special purpose insurer based in Bermuda.

Merna Re II Ltd. has issued three tranches of notes, which have been sold to investors and the proceeds used to collateralize reinsurance agreements with State Farm.

In total, the new Merna Re II 2024 cat bonds will provide State Farm with a $1 billion source of indemnity reinsurance over a term running to July 7th 2027, so a roughly three-year term.

The three tranches are split over three series into: a $250 million Series 2024-1 Class A tranche of notes, a $300 million Series 2024-2 Class A tranche of notes, and a $450 million Series 2024-3 Class A tranche.

Information is currently limited, although we do hope to glean more in time, but we are told the Class A tranche covers Florida wind related risks, so named storms and severe thunderstorms, although we cannot be 100% certain on this or the perils covered by the other tranches.

It would make sense for one tranche to cover those perils, given the next maturity in State Farm’s outstanding cat bonds is a $300 million Florida focused Merna Re II Ltd. (Series 2021-2) that matures in August.

We are informed that the perils differ across the tranches and that all tranches provide indemnity protection, which is typical of State Farm’s use of catastrophe bonds.

We understand that the spread pricing for each of the three tranches is as follows, Series 2024-1 Class A 7.25%, Series 2024-2 Class A 8.75%, and Series 2024-3 Class A 8.5%.

The only other detail we’ve learned so far is that Aon Securities was the lead bookrunner for this latest State Farm cat bond transaction.