Topanga Re Ltd. (Series 2025-1)

This is the second catastrophe bond transaction to be sponsored by Farmers Insurance Group, the US insurer that operates across a number of reciprocal insurer brands and has links to Zurich Insurance Group.

The company has launched this Topanga Re 2025-1 cat bond with an initial target to secure $300 million of multi-year and multi-peril US catastrophe reinsurance protection from the capital markets.

Using the Bermuda based special purpose insurer (SPI) named Topanga Re Ltd., this Series 2025-1 issuance for Farmers sees two tranches of cat bond notes on offer.

With this new cat bond, Farmers Insurance Group aims to secure a minimum $300 million of per-occurrence catastrophe reinsurance protection, so it’s encouraging to see this being larger already than the insurer’s first.

The two tranches of Topanga Re Series 2025-1 cat bond notes will both provide Farmers and its subsidiary underwriting entities with reinsurance protection against certain losses from named storms, earthquakes, severe weather and wildfires affecting the United States.

A $200 million Class A tranche of notes are being issued to provide Farmers with per-occurrence and indemnity trigger protection over a four-year term, starting at the beginning of 2026 to the end of 2029. The Class A tranche of notes attach at $1 billion and exhaust that protection at $1.3 billion, we understand, although sources said that stated and inuring reinsurance layers mean the effective attachment would actually be at $3 billion for a first event.

The Class A notes come with an initial base attachment probability of 1.7%, an initial base expected loss of 1.47%, and they are being offered to cat bond investors with price guidance for a spread in a range from 4.75% to 5.25%.

The Class B tranche of notes are sized at $100 million and will also provide per-occurrence and indemnity trigger protection over a four-year term attaching at $2.1 billion and exhaust that protection at $2.9 billion. There is no inuring reinsurance for these notes, so the attachment is as stated we are told.

The Class B tranche of notes come with an initial base attachment probability of 3.33%, an initial base expected loss of 2.42%, and are being offered to investors with price guidance for a spread in a range from 6.25% to 6.75%.

It’s also important to note that we understand this Topanga Re (Series 2025-1) cat bond issuance also features a subrogation extension mechanism for wildfire events, as its first transaction did.

Update 1:

We understand that the target size for this Topanga Re 2025-1 catastrophe bond issuance for Farmers Insurance Group has been increased, with now between $350 million and $400 million of reinsurance limit sought.

The Class A notes are now targeted at between $250 million and $300 million in size, while their price guidance has been fixed for a spread of 4.75%.

The Class B notes remain at $100 million in size, but with updated price guidance for a spread of between 5.75% and 6.25%.

Update 2:

Farmers successfully secured the one-third upsized target of $400 million of reinsurance from its latest Topanga Re 2025-1 catastrophe bond.

The Class A notes were finalised at their 50% upsized $300 million in size, priced to pay investors a risk interest spread of 4.75%.

The Class B notes were finalised at $100 million in size, priced to pay investors a risk interest spread of 5.75%.