Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

CEA targets $400m of reinsurance with first Ursa Re cat bond of 2019


The California Earthquake Authority, the not-for-profit residential earthquake insurance provider in the state, has returned to the capital markets to sponsor its first catastrophe bond of 2019, targeting around $400 million of quake reinsurance protection with an Ursa Re Ltd. (Series 2019-1) deal.

california-earthquake-authority-logoThis new Ursa Re 2019-1 cat bond will be the California Earthquake Authority’s (CEA) seventh takedown under the Ursa Re Ltd. special purpose insurer note program and the eleventh cat bond where the California based earthquake insurance specialist is listed in our Deal Directory as the sponsor.

Catastrophe bond transactions play a key role in the CEA’s reinsurance protection.

It’s encouraging to see the insurer back though, as the CEA uses all forms of reinsurance coverage and has been known to issue private insurance-linked securities (ILS) deals as well. The fact it has returned suggests market conditions and investor appetite are seen as conducive at this time to securing another larger chunk of its reinsurance program from the capital markets.

We understand that the CEA is bringing this latest catastrophe bond to market in the hopes of extending its fully collateralized earthquake reinsurance protection by as much as $400 million, through an issuance of a single tranche of Series 2019-1 Class C notes from Ursa Re Ltd.

The notes will be exposed to losses from California earthquake events, using an indemnity trigger and structured on an annual aggregate basis, we’re told.

We understand that the cat bond backed reinsurance protection from the Ursa Re 2019-1 cat bond is set to run across a three-year term.

The $400 million or more of notes issued will be sold to investors and the proceeds used to collateralize underlying reinsurance agreement between Ursa Re and the CEA.

The covered layer is said to be $500 million in size (leaving room to upsize if desired), sitting above a near $4 billion retention, giving an attachment probability of 2.25% and an expected loss of 2.11%.

The notes are being offered to cat bond investors with price guidance in a range from a coupon of 5,25% to 5.75%, we understand.

Sources told us that Swiss Re Capital Markets is structuring this new Ursa Re 2019-1 cat bond and also acting as a bookrunner alongside Aon Securities, while EQECAT is the risk modeller.

That’s all the detail we have for now, but we will update you should more become available to us.

We’ve added the Ursa Re Ltd. (Series 2019-1) catastrophe bond transaction to our comprehensive Deal Directory, where you can read about this and almost every other cat bond deal since the market began.

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