Ursa Re II Ltd. (Series 2025-2)

The California Earthquake Authority (CEA) is back in the catastrophe bond market for a third time in 2025, seeking more fully-collateralized earthquake reinsurance protection from the capital markets through what will be the 23rd cat bond sponsored by the entity that we have tracked.

The CEA is again using its special purpose insurer (SPI) Ursa Re II Ltd., but this time has an initial target to secure $600 million or more in California earthquake reinsurance protection from the insurance-linked securities (ILS) market with this new deal, making it one of the insurer’s largest from the start.

We understand from sources that through Ursa Re II Ltd., the CEA is targeting issuance of two tranches of Series 2025-2 catastrophe bond notes.

These notes are set to be sold to cat bond investors and the proceeds will be used to collateralize reinsurance agreements between the issuing vehicle Ursa Re II Ltd. and the CEA.

The Ursa Re II Series 2025-2 cat bond notes will provide the CEA with an up to four year source of fully-collateralized California earthquake reinsurance protection. The protection will be afforded on an indemnity trigger and annual aggregate basis, which is typical of the Authority’s cat bond deals.

With $600 million of reinsurance limit targeted across the two tranches of cat bond notes, one is set to provide four years of protection, the other around two and a half years, as the CEA continues to stagger its maturities to match the profile of its protection needs, we are told.

A currently $200 million Series 2025-2 Class E tranche of notes will provide the CEA with four years of annual aggregate California earthquake reinsurance protection, running to the end of November 2029, sources said.

The Class E notes would attach their coverage at $3.831 billion of losses and share in a $500 million layer, giving them an initial attachment point of 3.47%, an initial expected loss of 3.28% and they are being offered to investors with price guidance in a range from 5.25% to 6%.

A currently $400 million Series 2025-2 Class FG tranche of notes will offer the CEA around two and a half years of annual aggregate California earthquake reinsurance protection, running to the end of May 2028, we have been told.

The Class FG notes are riskier and would attach their coverage at $2.293 billion of losses, sharing in a $500 million layer, giving them an initial attachment point of 5.16%, an initial expected loss of 4.81% and they are being offered to investors with price guidance in a range from 7.75% to 8.5%, sources said.

At the mid-points of the guidance range for spreads, the Class E notes would come with a multiple-at-market of almost 1.72 times expected loss, while the Class FG notes would come with a multiple of almost 1.69 times expected loss.

Those are particularly low spread multiples of expected loss for any of the CEA’s catastrophe bonds it has ever sponsored.

Update 1:

The California Earthquake Authority (CEA) has increased the targeted amount of reinsurance limit from this Ursa Re II Series 2025-2 catastrophe bond issuance to now between $670 million and $770 million, we are told.

At the same time, the insurer is aiming to secure the coverage at pricing either below or at the bottom end of the initial guidance that the notes had been offered with.

The Class E notes are now targeted at an upsized $270 million, while their price guidance has been updated to between 5% and 5.25%.

The Class FG notes are now targeted at between their initial $400 million and an upsized $500 million, while their price guidance has been updated at the lower-end of 7.75%.

Update 2:

The California Earthquake Authority (CEA) secured the upsized target amount of reinsurance limit from this Ursa Re II Series 2025-2 catastrophe bond issuance, with the deal pricing to provide $770 million of multi-year protection.

The Class E notes priced at their upsized $270 million to pay investors a spread of 5%.

The Class FG notes priced at their upsized $500 million to pay investors a spread of 7.75%.