California utility LADWP returns for fourth wildfire cat bond, $100m 123 Lights Re

The Los Angeles Department of Water and Power (LADWP) is back in the catastrophe bond market for its fourth deal sponsorship, seeking up to $100 million of California wildfire protection from a 123 Lights Re Ltd. (Series 2026-1) offering, Artemis can report.

The Los Angeles Department of Water and Power (LADWP) is the largest municipal utility operating in the United States and has been accessing insurance risk capital through catastrophe bonds since 2020.

The LADWP brought its debut cat bond to market in 2020, securing $50 million of protection from a Power Protective Re Ltd. (Series 2020-1) deal, which utilised a parametric trigger.

The utility returned in 2021, securing $30 million of wildfire protection with a Power Protective Re Ltd. (Series 2021-1) cat bond, this time utilising an indemnity trigger.

For its third catastrophe bond sponsorship in July 2025, the LADWP used a new structure 123 Lights Re Ltd., this time securing $100 million of wildfire protection on a county-weighted industry loss index trigger basis.

In 2026, the LADWP returns using that same Bermuda special purpose insurer (SPI), 123 Lights Re Ltd. again, with an industry loss trigger set to be used for the second time with its fourth cat bond sponsorship.

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

The Los Angeles Department of Water and Power (LADWP) serves millions of residents and has been in operation since 1902, supplying water to homeowners and businesses in Los Angeles and the surrounding communities, while also supplying electricity since 1917.

The municipal utility is again looking to secure catastrophe insurance for wildfire risks in the region of California where it operates, as its infrastructure is exposed to wildfires, with this fourth cat bond.

The LADWP’s infrastructure could also ignite wildfires, so it’s assumed there are elements of wildfire liability protection within its motives for securing more risk capital through this cat bond.

The utility will source its capital markets backed insurance through arrangements with a White Rock captive cell and with global reinsurance company Hannover Re, which intermediate the capital markets protection on its behalf.

Just like the 2025 cat bond, the utility will have 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 the SPI named 123 Lights Ltd.

123 Lights Re Ltd. is offering a single $100 million tranche of Series 2026-1 notes to investors, with the proceeds from their sale set to be used to collateralize the retro agreement with Hannover Re, with the coverage then cascading through the reinsurance agreement with the White Rock cell and back to the LADWP via an insurance agreement.

LADWP will benefit from insurance coverage 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, we understand from sources.

The $100 million of Series 2026-1 Class A notes that 123 Lights Re is offering to investors come with an initial modelled attachment probability of 4.67%, an initial modelled expected loss of 3.07% and that they have price guidance for an initial risk interest spread of between 9% and 10%, we are told.

For 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 priced to pay investors a spread of 11%.

So the targeted execution suggests a much lower multiple-at-market, reflecting investors increasing confidence in the sponsor, the wildfire peril and also the soft pricing environment, of course.

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.