CEA’s new Ursa Re 2018-1 California quake cat bond sees pricing tighten


Pricing has tightened for the new up to $250 million Ursa Re Ltd. (Series 2018-1) catastrophe bond that is being currently marketed on behalf of the California Earthquake Authority (CEA) and at the moment looks like it will settle close to or just below the initial guidance mid-point.

The California Earthquake Authority, the not-for-profit residential earthquake insurance provider, launched its sixth Ursa Re Ltd. catastrophe bond just over a fortnight ago, targeting up to $250 million of collateralized reinsurance coverage from the issuance.

These cat bond transactions now play an increasingly important piece of the CEA’s growing reinsurance protection as it now has $2.075 billion of catastrophe bond risk capital outstanding (according to Artemis’ data), making the Authority one of the largest users of the capital markets for its reinsurance protection, in a securitised and 144A form.

The new Ursa Re 2018-1 cat bond sees the CEA targeting between $200 million and $250 million of reinsurance protection, to replace the Ursa Re 2015-1 cat bond that is scheduled to mature in September.

This issuance will see a single tranche of Class D notes sold to investors, to collateralize and provide annual aggregate reinsurance protection to the CEA, on an indemnity trigger basis, with protection running to September 2021.

The reinsurance protection from this cat bond issue will cover the CEA for losses across a $500 million layer of risk from $2.521 billion of losses upwards and the single tranche of Class D notes have an expected loss of 2.87%.

They were initially offered to investors with price guidance in a range from 4.9% to 5.4%, but we’re now told that this guidance has tightened to a range of 5% to 5.25%, suggesting pricing will be near to or just below the middle of initial coupon guidance.

As we said at the time this new Ursa Re 2018-1 cat bond was launched to the market, the pricing looks aligned with other recent California earthquake cat bond deals if it does price near the mid-point of marketed spread guidance.

At the same time we’re told the target size remains unchanged at a target of up to $250 million of reinsurance cover for the CEA.

We’ll keep you updated as this Ursa Re Ltd. (Series 2018-1) cat bond transaction comes to market and you can read about this and every other catastrophe bond since the market began in the Artemis Deal Directory.

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