Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Ursa Re Ltd. (Series 2023-2)

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Ursa Re Ltd. (Series 2023-2) – At a glance:

  • Issuer: Ursa Re 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: $230m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Oct 2023

Ursa Re Ltd. (Series 2023-2) – Full details:

The California Earthquake Authority (CEA) is back in the catastrophe bond market, seeking a $150 million or larger source of capital markets backed reinsurance with this Ursa Re Ltd. (Series 2023-2) issuance.

This latest cat bond from the CEA sees the earthquake insurer using its Ursa Re Ltd. special purpose insurer (SPI) in Bermuda, seeking $150 million or more in reinsurance from the issuance of a single Class E tranche of Series 2023-2 notes, we understand from sources.

We’re told that reinsurer Swiss Re is acting as the ceding reinsurer, to front the capital markets for the CEA. So Swiss Re will enter into a retrocessional reinsurance agreement with note issuer Ursa Re, then a reinsurance agreement with the CEA.

The single tranche of notes to be issued will provide the CEA with a $150 million or greater source of California earthquake reinsurance protection, on an indemnity and annual aggregate basis, which is typical of all CEA cat bonds.

The coverage will run across a just over three-year period, to the end of November 2026, with three loss occurrence periods, we are told.

The $150 million of Class E notes could attach when aggregated losses reach $3.024 billion or above during a loss occurrence period and will cover a share of the CEA’s losses across a $500 million layer of its reinsurance tower.

The Series 2023-2 Class E notes that Ursa Re Ltd. will issue are set to have an initial attachment probability of 3.51%, an initial expected loss of 3.28% and are being offered to cat bond investors with price guidance in a range from a spread of 9% to 9.75%, it’s said.

One tranche of the CEA’s last Sutter Re cat bond had a similar expected loss and priced with a spread of 9.75%, so it appears the issuer and bookrunners hope to price this new cat bond at a keener level.

Update 1:

The target size for the CEA’s latest catastrophe bond has been increased, with now between $200 million and $230 million of collateralized reinsurance sought from the issuance, so there is the potential for a roughly 53% upsizing.

At the same time, the spread guidance has now been fixed at 9.25%, so in the bottom half of the originally marketed range.

Update 2:

The California Earthquake Authority (CEA) successfully secured the top-end target size for its latest catastrophe bond, getting the $230 million of capital markets backed quake reinsurance with this Ursa Re 2023-2 cat bond deal.

The pricing was finalised at the lower-level of a 9.25% spread, so within the bottom half of the originally marketed range.

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