Torrey Pines Re Ltd. (Series 2025-1)

This will be the sixth catastrophe bond for Palomar Insurance and its initial size target suggests it will become the largest Torrey Pines catastrophe bond transaction so far.

The initial target is to secure $425 million or more in reinsurance against earthquake losses in California from the capital markets with this deal.

As with all recent cat bonds sponsored by Palomar, this new Torrey Pines Re Series 2025-1 issuance will provide fully-collateralized reinsurance protection to both Palomar Specialty Insurance Company and Palomar Excess and Surplus Insurance Company, we are told.

Bermuda based special purpose insurer (SPI) Torrey Pines Re Ltd. is offering three tranches of Series 2025-1 catastrophe bond notes initially amounting to $425 million, that will be sold to investors and the proceeds used to collateralize reinsurance agreements to protect the Palomar underwriting entities on a multi-year basis.

All three tranches of notes will give Palomar capital markets backed reinsurance protection against California earthquake losses, on an indemnity and per-occurrence basis, sources said.

The covered area can, like other recent Torrey Pines Re cat bonds, be expanded to include any additional states of Palomar’s choosing after the first reset, meaning the insurer has optionality should it expand its underwriting scope.

All three tranches of notes will provide Palomar with reinsurance across a three year term, to the start of June 2028, we understand.

A Series 2025-1 Class A tranche of notes are targeting $125 million in coverage for Palomar, attaching at $1.3 billion and exhausting coverage at $1.5 billion.

The Class A notes have an initial attachment probability of 1.33%, an initial expected loss of 1.22% and are being offered to investors with price guidance in a range from 3.5% to 4%, we are told.

A Series 2025-1 Class B tranche targets $175 million in coverage for Palomar, attaching lower down at $650 million and exhausting coverage at $1.3 billion.

The Class B notes have an initial attachment probability of 2.57%, an initial expected loss of 1.84% and are being offered to investors with price guidance in a range from 4.5% to 5%, sources said.

A final Series 2025-1 Class C tranche targets $125 million in coverage for Palomar, attaching lower down again at $325 million and exhausting coverage at $650 million.

The Class C notes have an initial attachment probability of 4.16%, an initial expected loss of 3.25% and are being offered to investors with price guidance in a range from 6.5% to 7%, we understand.

Update 1:

We understand that Palomar is now targeting up to $525 million of reinsurance from this new Torrey Pines Re 2025-1 catastrophe bond issuance.

The Series 2025-1 Class A tranche of notes are now targeted at up tod $150 million in size, while their price guidance is unchanged at 3.5% to 4%.

The Series 2025-1 Class B tranche of notes are now targeted to provide $200 million in coverage for Palomar, with their price guidance moved to the low-end of 4.5%.

The Series 2025-1 Class C tranche of notes are now targeted to secure $175 million in coverage for Palomar, while their price guidance has also now been reduced and fixed at the low-end of 6.5%.

Update 2:

Palomar successfully secured the 24% upsized target of $525 million of California earthquake reinsurance protection from its new Torrey Pines Re 2025-1 catastrophe bond.

The Series 2025-1 Class A tranche of notes settled at $150 million in size, priced to pay a spread of 3.75%, so the mid-point of the initial range.

The Series 2025-1 Class B tranche of notes settled to provide $200 million in coverage for Palomar, priced at the low-end of 4.5%.

The Series 2025-1 Class C tranche of notes settled to secure $175 million in coverage for Palomar, priced again at the low-end of 6.5%.