CEA successfully upsizes Sutter Re 2020 quake cat bond 75% to $700m

The California Earthquake Authority (CEA) has now settled for a 75% upsizing of its latest catastrophe bond issuance, with the Sutter Re Ltd. (Series 20201- & 2020-2) issuance now fixed to provide $700 million of collateralised earthquake reinsurance protection.

The not-for-profit residential earthquake insurer of California had returned to the catastrophe bond market in April with its first issuance of 2020, a new transaction with which it aimed to secure at least $400 million of earthquake reinsurance protection from the capital markets for its tower.

The California Earthquake Authority (CEA) quickly found cat bond investors receptive to the transaction and the target was lifted 75% to up to $700 million at first, before then being lifted further to up to $740 million.

In the end the Sutter Re 2020 catastrophe bond issuance has settled at $700 million in size, representing a 75% upsizing of the deal and a significant capital markets boost to the CEA’s reinsurance tower.

So now, Bermuda based special purpose insurer (SPI) Sutter Re Ltd. will issue $700 million of California earthquake reinsurance exposed catastrophe bond notes for the CEA, giving the insurer a multi-year, fully collateralised source of reinsurance protection against earthquakes in California on an annual aggregate and indemnity trigger basis.

Two tranches of notes will provide coverage across a three-year term (the Series 2020-1 notes) and two tranches across two years (the Series 2020-2 notes), with each featuring annual loss occurrence periods for the purpose of aggregation.

Now finalised, our sources said the Sutter Re catastrophe bond offering now looks like this.

The Series 2020-1 Class A Notes, with a three year term and an initial expected loss of 1.21%, reached their maximum target of $200 million of protection, at pricing of 5%.

The Series 2020-1 Class F Notes, also with a three year term and with an initial expected loss of 3.69%, reached $135 million in size, close to their maximum target for the CEA, with pricing of 8.5%.

The Series 2020-2 Class A Notes which will provide two years of cover and have an initial expected loss of 1.21%, reached $215 million in terms of issuance size, again nearer the upper-end of targeted size, at pricing of 5%.

Finally, the Series 2020-2 Class F Notes which will also provide two years of cover and have an initial expected loss of 3.69%, stayed at the lower end of their targeted issuance size at $150 million, with pricing of 8.5%.

With this Sutter Re Ltd. (Series 20201- & 2020-2) catastrophe bond issuance from the California Earthquake Authority (CEA) now finalised at $700 million in size, we understand that the Series 2020-1 issuance with a three-year term that is $335 million in size will complete on May 15th, while the Series 2020-2 issuance with a two-year term that is $365 million in size will complete on May 28th.

You can read about this and every other catastrophe bond transaction in the Artemis Deal Directory.