Nature Coast Re Ltd. (Series 2023-1)

Safepoint Insurance Company is back in the catastrophe bond market for its first issuance since 2019, having failed to get a 2022 transaction away.

With a new Bermuda based issuance vehicle called Nature Coast Re Ltd. established, Safepoint is back and targeting at least $150 million of reinsurance protection from the capital markets, to cover certain losses from named storms affecting Florida and Louisiana.

Nature Coast Re will issue two tranches of Series 2023-1 notes that will be sold to insurance-linked securities (ILS) funds and investors and the proceeds be used to collateralize reinsurance agreements between the issuer and Safepoint entities.

This Nature Coast Re 2023-1 cat bond will provide reinsurance to both Safepoint Insurance Company and its Cajun Underwriters Reciprocal Exchange entity, we understand.

We’re told the cat bond will cover the insurer for named storm losses in the states of Florida and Louisiana on a per-occurrence and indemnity trigger basis, across a three-year term to November 30th 2026.

Both tranches of notes are currently targeted at $75 million in size, we understand, but there is room for each to upsize if issuance and pricing were conducive to do so.

A Class A tranche of notes cover a $200 million layer, attaching at $375m in Florida and $800m in Louisiana, while the exhaustion point would be $575m in Florida and $1bn in Louisiana, we are told.

That gives the Class A notes an initial attachment probability of 1.18%, an initial expected loss of 0.93% and the spread price guidance is from 9% to 10%.

The Class B notes also cover a $200 million layer but are riskier, attaching at $175m in Florida and $600m in Louisiana, while the exhaustion point would be $375m in Florida and $800m in Louisiana, so the B’s sit directly beneath the A’s in Safepoint’s reinsurance tower.

As a result, the Class B notes have an initial attachment probability of 2.33%, an initial expected loss of 1.60% and their spread price guidance is from 11.5% to 12.5%, sources said.

Update 1:

We understand that Safepoint’s target size for this Nature Coast Re 2023-1 catastrophe bond issuance has lifted to between $165 million and $225 million.

We are told the Class A tranche of notes, which are the lower-risk layer with an initial expected loss of 0.93%, are being pitched at between $125 million and $150 million in size.

The Class A notes had initial spread price guidance of 9% to 10%, which we’re now told has been fixed at the upper-end of 10%.

The Class B notes, which are riskier and have an initial expected loss of 1.60%, are now targeted at between $40 million and their original $75 million size, we understand.

While the Class B notes originally had spread price guidance of 11.5% to 12.5%, but we now understand this to have been raised and fixed at 13.5%.

Update 2:

We’re now told that Safepoint secured $195 million of reinsurance with this Nature Coast Re 2023-1 catastrophe bond.

The Class A notes reached their maximum target of $150 million in size, with the spread priced at 10%.

The Class B notes completed at $45 million in size, so below their initial target for $75 million of cover, and their spread was priced at 13.5%, so above the initial price guidance.