Ursa Re II Ltd. (Series 2022-1)

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Ursa Re II Ltd. (Series 2022-1) – 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: $245m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2022

Ursa Re II Ltd. (Series 2022-1) – Full details:

For its first cat bond issuance in more than one-year, the CEA is looking to secure $275 million or more of multi-year and fully-collateralized California earthquake reinsurance protection.

Ursa Re II Ltd., a Bermuda based SPI, will issue two tranches of Series 2022-1 notes, each to be sold to investors and the proceeds used to collateralize reinsurance agreements between the vehicle and the CEA.

The notes will all provide the CEA with indemnity and annual aggregate based reinsurance against California earthquake events, across a roughly three-year term.

A $150 million tranche of Class A notes will cover a percentage of a $500 million layer of the CEA’s reinsurance, attaching above just over $7 billion, giving them an initial expected loss of 1.33%, we’re told.

The Class A notes are being offered to cat bond investors with price guidance in a range from 4.25% to 4.75%.

A currently $125 million tranche of Class B notes will cover a percentage of another $500 million layer of the CEA’s reinsurance, attaching close to $2.85 billion (so riskier), giving them an initial expected loss of 3.28%, we’re told.

The Class B notes are being offered to cat bond investors with price guidance in a range from 6.75% to 7.5%, we understand.

Update 1:

We’re now told the target has dropped to between $210 million and $255 million across the two tranches of Series 2022-1 notes.

What was a $150 million tranche of Class A notes is now sized at up to $175 million, so this layer is likely to upsize. However their pricing has risen to above the initial range, at 5%.

The Class B notes are now sized at $60 million to $80 million, so look set to shrink below target, while their price guidance has been elevated to between 7.5% to 7.75%, so again above guidance.

Update 2:

The CEA’s latest catastrophe bond eventually settled at $245 million in size.

The Class A notes actually upsized, having begun at $150 million and now fixed at $175 million, while their coupon was finalised at 5%, so above the initial range.

The riskier layer of Class B notes shrank to $70 million in size for the CEA, while their coupon was finalised at 7.75%, so the top-end of raised price guidance.

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