The California Earthquake Authority’s (CEA) is set to achieve its $500 million of collateralized reinsurance protection upper target from the Ursa Re Ltd. (Series 2016-1) catastrophe bond transaction, but pricing has settled at the top end of guidance we’re told.
CEA’s latest cat bond, Ursa Re 2016-1, launched earlier this month and saw the insurer seeking a three-year source of fully collateralised reinsurance protection against California earthquake losses, through the sale of one tranche of annual aggregate and indemnity structured cat bond notes to investors.
At launch the CEA was seeking $300 million of reinsurance protection through Ursa Re 2016-1, but its ambitions rose as investor demand was strong with the target rising to as much as $500 million of cover, a potential 67% upsize, if investors were particularly receptive to the cat bond deal.
Now, according to sources, the Ursa Re 2016-1 cat bond has been priced and the CEA has achieved the 67% increase in size of the transaction to $500 million. At the same time the pricing on the $500 million of cat bond notes has settled at the top-end of initial guidance, we’re told.
When this Ursa Re cat bond was launched the pricing was set in a range of 3.25% to 4%, but was subsequently tightened during marketing to a 3.75% to 4% range. We’re told that pricing has now settled at 4%, so the top-end of coupon guidance. With the transactions base expected loss of 2.18% the pricing is aligned with other California earthquake deals.
As a result of the upsizing this Ursa Re 2016-1 catastrophe bond will be the largest single issuance in the CEA’s history of using securitisation and the capital markets as a source of reinsurance cover.
The CEA had previously said that it would only come back to the cat bond market when pricing was conducive to do so, having slowed down its use of cat bonds over recent years. It seems that the time was right for a larger transaction and clearly the ILS investor community has strongly supported the CEA’s reinsurance needs in 2016, resulting in this larger than expected deal.
The Ursa Re Ltd. (Series 2016-1) catastrophe bond issuance is expected to be completed by the end of the month. You can read about this and every other CEA sponsored cat bond in the Artemis Deal Directory.