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

The Los Angeles Department of Water and Power (LADWP) is aiming to price its fourth catastrophe bond sponsorship at the low-end of initial guidance, while still seeking $100 million of California wildfire protection from the 123 Lights Re Ltd. (Series 2026-1) offering, Artemis understands.

California utility the Los Angeles Department of Water and Power (LADWP) returned to the catastrophe bond market in June, aiming to secure another $100 million of multi-year wildfire insurance protection from the capital markets.

That target remains unchanged, but the utility is aiming to reduce the pricing of the protection, with the spread guidance now updated to the low-end of the initial range, we are told.

Recall that, this will be the fourth catastrophe bond for the LADWP, having first entered the market in 2020 and since returned 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.

While the utility’s catastrophe bonds have differed in structure, the first being parametric, the second indemnity trigger based and third featuring an industry-loss trigger, this fourth sees it sticking with the industry-loss trigger structured protection for a second sponsorship.

123 Lights Re Ltd., a Bermuda special purpose insurer (SPI), continues to offer investors a single $100 million tranche of Series 2026-1 notes that will cascade down insurance coverage to the LADWP, which will provide the utility 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 is offering to investors come with an initial modelled expected loss of 3.07% and first came with price guidance of between 9% and 10%.

We’re now told that the price guidance has been 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.

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 this fourth cat bond looks set to come with a much lower multiple-at-market for the LADWP, reflecting investors increasing confidence in the sponsor, the wildfire peril and also the soft 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.