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California Earthquake Authority lifts Ursa Re cat bond target to $200m


The California Earthquake Authority (CEA) has lifted its target for its new Ursa Re Ltd. (Series 2023-1) catastrophe bond transaction, with now $200 million of reinsurance sought, while the pricing guidance has dropped for both of the tranches being issued.

california-earthquake-auth-cea-logoThe California Earthquake Authority (CEA) returned to the catastrophe bond market in late March, with what will be its first issuance of 2023.

The insurers special purpose insurer in Bermuda Ursa Re Ltd. is aiming to issue two tranches of Series 2023-1 notes, that will be sold to investors and the proceeds used to collateralize a retrocessional reinsurance agreement with Swiss Re, while Swiss Re will in turn provide the earthquake reinsurance to the CEA.

The notes will provide the CEA with a new multi-year source of annual aggregate reinsurance against California earthquakes, over a just more than two years and seven month term, with maturity expected at the end of November 2025.

At their launch, the two tranches of notes were targeted to provide $175 million of earthquake reinsurance from the capital markets for the CEA.

Now, we’re told the target size has been lifted to $200 million of reinsurance, although it does appear there’s a chance that could actually reach $225 million, if pricing proved conducive.

On that pricing, following on the heels of other recent cat bond issues, the CEA’s latest transaction looks set to price at the bottom of guidance, or lower.

Originally, a tranche of Class AA notes were pitched at $100 million in size, with an initial expected loss of 1.05% and were offered to investors with spread price guidance in a range from 6% to 6.5%.

Now, we understand the Class AA tranche of notes have been targeted at between $100 million and $125 million in size, while the price guidance has been lowered to 5.5% to 6%.

The second layer of cover was a proposed $75 million tranche of Class C notes, with an initial expected loss of 2.3% and first offered with spread price guidance in a range from 8.75% to 9.25%.

The Class C notes are now sized at between $75 million and $100 million, we’re now told, while their price guidance has also been lowered to 8.25% to 8.75%, we understand.

So, it seems a slight upsizing is on the cards, with we understand $200 million of reinsurance sought, although $225 million perhaps possible, while pricing of both tranches of notes looks set to come in at the bottom of initial guidance, or even lower.

Which would represent a strong result for the CEA, as it looks to fill out its reinsurance needs for 2023 and with a successful execution on the cards for its first cat bond of the year, we can anticipate the earthquake insurer coming back for more as 2023 progresses.

You can read all about this new Ursa Re Ltd. (Series 2023-1) catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory.

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