California utility LADWP gets $100m 123 Lights Re wildfire cat bond pricing at low-end

The Los Angeles Department of Water and Power (LADWP) has successfully priced its fourth catastrophe bond sponsorship today and so secured the targeted $100 million of California wildfire protection from the 123 Lights Re Ltd. (Series 2026-1) offering at the low-end of price guidance, Artemis has learned.

Californian utility the Los Angeles Department of Water and Power (LADWP) came back to the catastrophe bond market in June, with an initial target to add another $100 million of multi-year wildfire insurance protection from the capital markets.

As we reported in a first update on this 123 Lights Re Series 2026-1 cat bond deal, that target remained unchanged, but the utility was looking to reduce the cost of the protection, with the spread guidance updated at the low-end of the initial range.

Now, we’re told those pricing ambitions have been achieved with the details finalised and the notes priced today, meaning that the LADWP has now secured its targeted $100 million of wildfire coverage, at that low-end of price guidance.

Once settled, this will become the fourth catastrophe bond sponsored by the LADWP, with the utility having first entered the market in 2020, since returning in 2021 and 2025 for more cat bond-backed wildfire insurance.

Read about all of the LADWP’s catastrophe bonds in our extensive Deal Directory.

With the notes now priced and details all finalised, Bermuda special purpose insurer (SPI) 123 Lights Re Ltd. will issue and sell to investors a single $100 million tranche of Series 2026-1 notes that will cascade down insurance coverage to the LADWP.

The protection route for the LADWP runs from an insurance agreement with a cell of Aon’s Vermont-based White Rock cell captive vehicle, while Hannover Re will reinsure White Rock and interface with the capital market investors, fronting the wildfire risks for the LA municipal utility via a retrocessional reinsurance agreement with 123 Lights Re.

The $100 million of notes will provide the utility with insurance protection on a county-weighted industry loss index basis covering wildfire events in the state of California, over a roughly three year term until the end of August 2029.

The $100 million of Series 2026-1 Class A notes that 123 Lights Re will now issue come with an initial modelled expected loss of 3.07%.

At first, the notes came with price guidance of between 9% and 10% But that was lowered and fixed at the bottom-end of that range, for an initial risk interest spread of 9% to be paid to investors in the notes, which is where the deal’s pricing has been finalised, sources said.

As a comparison, last year’s 123 Lights Re 2025-1 catastrophe bond was less risky at launch, having an initial expected loss of 2.02% and its notes priced to pay investors a spread of 11%.

This fourth cat bond for the LADWP comes with a much lower multiple-at-market, so effectively a lower cost of protection compared to the previous deal, which as we said reflects investors’ increasing confidence in the sponsor, in the wildfire peril and also the softer reinsurance pricing environment.

You can read all about this 123 Lights Re Ltd. (Series 2026-1) catastrophe bond and every other cat bond deal in the extensive Artemis Deal Directory.