Ursa Re II Ltd. (Series 2025-1)

The California Earthquake Authority (CEA) has returned in search of more earthquake reinsurance protection from the capital markets through what will be the 22nd catastrophe bond from the entity that we have tracked.

The CEA has returned using its special purpose insurer (SPI) Ursa Re II Ltd., with an initial target to add a further $250 million of California earthquake reinsurance protection from the insurance-linked securities (ILS) market with this new deal.

Ursa Re II Ltd. is targeting issuance of a single Class G tranche of Series 2025-1 catastrophe bond notes, we have learned.

These notes will be sold to cat bond investors and the proceeds used to collateralize a reinsurance agreement between the issuing vehicle and the CEA.

The Ursa Re II Series 2025-1 cat bond notes will provide the CEA with a three-year source of fully-collateralized California earthquake reinsurance protection, on an indemnity trigger and annual aggregate basis, which is typical of most of the Authority’s cat bond deals.

Sources said the currently $250 million tranche of Class G notes will provide the CEA with reinsurance coverage across a $400 million layer of its risk transfer tower, while having a $1.7 billion retention in place for the first loss occurrence period.

The Class G notes will come with an initial attachment probability of 5.26%, an initial expected loss of 4.88% and they are being offered to investors with price guidance in a range from 8.5% to 9.25%, we understand.

At the mid-point of that guidance range, the spread multiple-at-market would be almost 1.82 times the expected loss.

Update 1:

We understand that the California Earthquake Authority (CEA) has raised its target for this new Ursa Re II 2025-1 catastrophe bond issuance, with between $300 million and as much as $400 million of reinsurance limit now sought.

At the same time we’re told the price guidance has been updated to a single figure of a 9% spread, so within the initial guidance range.

Update 2:

We’ve now learned that the California Earthquake Authority (CEA) secured the 60% upsized target for its new Ursa Re II 2025-1 catastrophe bond, finalising the offering to provide it $400 million in reinsurance protection from the capital markets.

The Class G notes priced at the revised 9% spread, so within the initial guidance range and for a spread multiple of 1.84 times the expected loss.