AmCoastal secures $25.5m Armor Re II 2026-2 cat bond cover, likely a retention buy-down

American Coastal Insurance Company (AmCoastal Insurance) returned to the catastrophe bond market in recent weeks, Artemis can reveal, as a new $25.5 million Armor Re II Ltd. (Series 2026-2) issuance has been placed in the market, which appears likely to be a buy-down of the sponsors’ first-event reinsurance retention.

American Coastal Insurance Company is a familiar sponsor in the cat bond market, with now eight successful issuances (including this new one) that have used the Armor Re name listed in our extensive catastrophe bond Deal Directory.

The insurer secured a new $200 million source of Florida-focused reinsurance limit from an Armor Re II Ltd. (Series 2026-1) multi-peril cat bond that settled in April this year.

AmCoastal Insurance later reported its reinsurance arrangements from the mid-year renewal season, revealing first event limit extending to $1.68 billion of losses, as the company secured 14.4% more in coverage for $1.918 billion of occurrence-based limit in the aggregate this year.

Now though, we’ve uncovered some basic details on another catastrophe bond issued by AmCoastal Insurance’s special purpose insurer (SPI) in recent weeks, a $25.5 million Series 2026-2 transaction.

This new cat bond is clearly for the benefit of AmCoastal’s reinsurance tower, but details are scarce. However, research undertaken suggests this new cat bond placement may be a lower-layer deal, specifically to further reduce the insurers’ first-event retention for the hurricane season.

Armor Re II Ltd. has issued a single $25.5 million tranche of Series 2026-2 Class A notes, Artemis has learned.

The proceeds from the sale of the notes will be used to collateralize a reinsurance agreement between the SPI and American Coastal Insurance Company, we assume.

These notes are structured as discounted, or zero coupon we believe and their term runs from August 1st 2026 until the end of May 2027, with maturity due early June next year, we are told.

As a result, they seem to provide roughly one-year of protection, through the US hurricane season at least.

We don’t have specific details on the coverage the notes provide, but it’s safe to assume the $25.5 million of Armor Re II Series 2026-2 cat bond notes will have an indemnity trigger, given that is how AmCoastal arranges all of its reinsurance and cat bond protection.

We believe these cat bond notes provide a first-event retention buy-down for the AmCoastal reinsurance tower. The reason we think that, is that research shows filings and executive commentary after Q2 referred to a $25.5 million reduction in the retention after additional reinsurance was purchased to buy it down, incepting August 1st.

A filing stated, “Effective August 1, 2026, the Company purchased additional reinsurance coverage, lowering the Company’s first event retention from $49 million to $23.5 million. Subsequent event retentions were unchanged.”

AmCoastal Insurance CEO Brad Martz referred to this retention buy-down during a second-quarter earnings call this month.

His comments imply that, given the same sizing of the buy-down to this latest Armor Re II 2026-2 cat bond sponsorship, that it likely covers Florida named storm risks and at a much lower-layer of the reinsurance tower than the 2026-1 issuance, being below the towers previous first-event retention level.

CEO Martz had commented, “We recently seized an opportunity to reduce our first event hurricane retention from $49 million to only $23.5 million before income tax, effective August 1st. The outlook for hurricanes making landfall in Florida this year, along with continued softening of reinsurance pricing, allowed us to mitigate downside risk from potential hurricanes this year. This change is further evidence that ACIC is continuously monitoring the market and always on the lookout for opportunities to improve our risk adjusted performance.”

The CEO added that AmCoastal’s reinsurance strategy is to buy more protection when pricing is conducive, or to retain more risk when it is not. He also highlighted that the buy-down does not affect second and third event retentions, which remain unchanged. Martz also noted that with this additional reinsurance in place, “American Coastal should remain profitable this year, even with three full retentions.”

He later explained that the $25.5 million retention buy-down reinsurance cost approximately $8.4 million, which might suggest a rate-on-line of approaching 33%.

We don’t know what the pricing was for the Armor Re II Series 2026-2 cat bond notes, but the above would suggest that if this is indeed the buy-down layer of protection, then the potential return to investors if the transaction runs loss free through the hurricane season is high, compared to more typical cat bond pricing. That would be commensurate with a layer of the reinsurance tower so low down.

Given the sizing is the same, at $25.5 million, our assumption for now is that these Armor Re II Ltd. Series 2026-2 catastrophe bond notes are a securitization of the retention buy-down reinsurance arrangement.

If that proves to be correct, then it means the Armor Re II 2026-2 cat bond notes likely have an attachment point at $23.5 million of losses, and exhaust their coverage at $49 million, on a per-occurrence basis.

Given the suspected lower-layer nature of these catastrophe bond notes, as well as the fact they have been issued as zero-coupon or discounted, it’s likely they have been relatively privately placed, given the expected loss would likely be outside the appetite of many cat bond fund managers and investors.

But, their successful placement in time for an August 1st inception date demonstrates that the catastrophe bond and capital markets remain open to hurricane risk even during the early months of the season, which may be a valuable lesson for sponsors that consider boosting their reinsurance even at this time of the year.

We will update you should additional information emerge about this new Armor Re II Series 2026-2 cat bond deal.

You can read all about this new Armor Re II Ltd. (Series 2026-2) catastrophe bond transaction and every other cat bond ever issued in our Artemis Deal Directory.