Residential Reinsurance 2024 Limited (Series 2024-2)

USAA, the most consistent and prolific of catastrophe bond sponsors, has returned to the market targeting $325 million or more in protection from what will be the 44th catastrophe bond transaction we have tracked that is sponsored by the military mutual insurer.

USAA has tended to sponsor two catastrophe bond issuances each year of late, one cat bond that provides aggregate reinsurance protection in May, and a cat bond to provide per-occurrence cover in November.

This issuance is the regular November deal from USAA, seeing the military mutual insurer looking to secure $325 million or more in multi-year and per-occurrence multi-peril catastrophe reinsurance from the capital markets.

Using its Residential Reinsurance 2024 Limited structure located in the Cayman Islands, USAA is bringing three tranches of Series 2024-2 catastrophe bond notes to market, we understand.

All three tranches of notes will provide USAA with per-occurrence and indemnity triggered reinsurance protection against losses from the perils of U.S. tropical cyclones, earthquakes (plus fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact, other perils (all including auto & renter policy flood losses), which are the typical range of perils the insurer seeks cat bond cover for.

Each of the tranches will provide USAA with four years of protection, running from December 1st 2024 through November 30th 2028, we are told.

The first, Class 2 tranche of notes is preliminarily sized at $50 million and would attach at $2 billion of losses to USAA, exhausting at $2.9 billion, giving them an initial attachment probability of 8.21%, an initial expected loss of 6.14% and they are offered with price guidance of 14% to 15%.

The second, Class 3 tranche of notes is preliminarily sized at $125 million and would attach at $2.9 billion of losses to USAA, exhausting at $4.15 billion, giving them an initial attachment probability of 4.52%, an initial expected loss of 3.25% and they are offered with price guidance in a range from 7.75% to 8.5%.

The third and final, Class 4 tranche of notes is preliminarily sized at $150 million and would attach at $4.15 billion of losses to USAA, exhausting at $4.85 billion, which gives them an initial attachment probability of 2.35%, an initial expected loss of 2.05% and they are offered with price guidance of 6% to 6.5%, sources said.

Update 1:

The target size for this Residential Re 2024-2 cat bond issuance for USAA has now been increased to $450 million.

At the same time, the price guidance has been lowered for all three tranches of notes.

The Class 2 tranche of notes is now $75 million in size and being offered with an updated price guidance range of 13.25% to 14%.

The second, Class 3 tranche of notes are now $200 million in size and have an updated range of 7% to 7.75%

The third and final Class 4 tranche of notes are now $175 million and have an updated price range of 5.25% to 6%, we understand.

Update 2:

USAA successfully secured the upsized target of $450 million of reinsurance from its new Residential Re 2024-2 cat bond issuance.

All three tranches of notes were upsized and priced at the bottom end of their reduced spread guidance ranges.

The Class 2 tranche of notes were finalised at $75 million in size with a risk interest spread of 13.25%.

The second, Class 3 tranche of notes were finalised at $200 million in size and priced at 7%.

The final Class 4 tranche of notes were completed at $175 million in size and priced with a spread of 5.25%.