Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Ursa Re II Ltd. (Series 2021-1)

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Ursa Re II Ltd. (Series 2021-1) – At a glance:

  • Issuer: Ursa Re II Ltd.
  • Cedent / sponsor: California Earthquake Authority
  • Placement / structuring agent/s: Swiss Re Capital Markets is sole structuring agent and joint bookrunner. Aon Securities is joint bookrunner.
  • Risk modelling / calculation agents etc: EQECAT Inc.
  • Risks / perils covered: California earthquake
  • Size: $215m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Mar 2021

Ursa Re II Ltd. (Series 2021-1) – Full details:

The California Earthquake Authority (CEA) is back in the catastrophe bond market with its first transaction for 2021, seeking at least $150 million of fully collateralized earthquake reinsurance protection through this Ursa Re II Ltd. (Series 2021-1) issuance.

For this issuance, the CEA is using its Bermuda-based special purpose insurer named Ursa Re II Ltd.

Ursa Re II Ltd. will issue a single Series 2021-1 Class F tranche of notes, with a target issuance size of at least $150 million we understand.

The single tranche of notes will be sold to third-party ILS investors and funds, with the proceeds used to collateralize an underlying earthquake retrocessional reinsurance agreement between Ursa Re II Ltd. and ceding reinsurer Swiss Re, which in turn enters into a reinsurance agreement with the CEA.

The notes will provide the CEA with at least $150 million of California earthquake reinsurance protection across a roughly three-year nine month term, with the cover delivered on an annual aggregate and indemnity trigger basis.

The unusual term appears to be designed to bring this latest CEA cat bond into line with some of its other sources of protection maturity dates.

We understand that the $150 million of Class F notes from this Ursa Re II 2021-1 cat bond issuance, will have an initial expected loss of 3.74% and are being marketed to ILS investors with price guidance in a range from 6.75% to 7.25%.

The reinsurance protection from these cat bond notes will sit across a $500 million layer of the CEA’s program, attaching at $2.1 billion of losses to begin, we’re told.

Update 1:

We understand that the target for this cat bond has been raised, to up to $215 million in terms of issuance size.

At the same time, the pricing has tightened, with an amended range of 6.25% to 6.75% now marketed to investors.

Update 2:

The pricing was eventually fixed at the low-end of the reduced range, at a 6.25% coupon, while the upsized amount of $215 million of reinsurance protection was secured by the CEA.

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