Ursa Re Ltd. (Series 2023-3)

The California Earthquake Authority (CEA) is back in the catastrophe bond market, seeking $400 million or more in capital markets backed earthquake reinsurance protection from this Ursa Re Ltd. (Series 2023-3) issuance.

The CEA is using its Ursa Re Ltd. special purpose insurer (SPI) in Bermuda for its latest cat bond deal, seeking $400 million or more in reinsurance from the issuance of two tranches of Series 2023-3 notes, we understand from sources.

Where sometimes the insurer uses a global reinsurance firm to front the capital markets, with this Ursa Re 2023-2 ca bond the CEA is the direct ceding insurer in this case.

The notes will provide the CEA with a targeted $400 million or more in California earthquake reinsurance protection, on an indemnity and annual aggregate basis, across a three year term to the end of November 2026, we understand.

A $225 million Class AA tranche of notes will cover a share of losses above $8.893 billion for the CEA, giving them an initial attachment probability of 1.12%, an initial expected loss of 1.05% and this tranche is being offered to investors with price guidance in a range from 5% to 5.5%, we’re told.

A $175 million Class D tranche of notes will cover a share of losses above $3.894 billion for the CEA, so are a riskier layer, having an initial attachment probability of 2.83%, an initial expected loss of 2.68% and this tranche is being offered to investors with price guidance in a range from 8% to 8.75%, it’s said.

Update 1:

We’ve been told that the California Earthquake Authority (CEA) has increased the target size of its latest catastrophe bond issuance, with now up to $675 million of earthquake reinsurance sought from this Ursa Re Ltd. (Series 2023-3) deal.

What was a $225 million Class AA tranche of notes are now sized at between $275 million and $325 million, we’re told, while the spread guidance has now been fixed at the upper-end of 5.5%.

What was a $175 million Class D tranche of notes are now sized at between $300 million and $350 million, sources said, but again we’re told the spread guidance is now fixed at the top-end of 8.75%.

Update 2:

The CEA eventually priced this new Ursa Re 2023-3 catastrophe bond to provide it with $650 million of reinsurance protection, a 62.5% increase on the initial target.

The Class AA tranche of notes were finalised at $300 million in size, while the spread was priced at the upper-end of initial guidance at 5.5%.

Meanwhile, the Class D tranche of notes were finalised at $350 million in size, while their spread was finalised at the top-end of initial guidance at 8.75%.