CEA’s target for Sutter Re cat bond lifted again, now up to $740m

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The targeted issuance size for the latest catastrophe bond to be sponsored by the California Earthquake Authority (CEA) has risen again, with the Sutter Re Ltd. (Series 20201- & 2020-2) issuance now aiming for as much as $740 million of reinsurance protection for the sponsor.

california-earthquake-authority-logoCalifornia’s not-for-profit residential earthquake insurer, the California Earthquake Authority (CEA), came back to the catastrophe bond market just over a fortnight ago 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.

As we explained on Friday of last week, the Sutter Re 2020 catastrophe bond issuance had been well-received by insurance-linked securities (ILS) funds and investors and as a result the target for the issuance was lifted to between $500 million at minimum, up to a maximum of $700 million of protection across the two series and four tranches of notes being sold to investors.

Now, we understand that the targeted issuance size has lifted again and its range narrowed, as our sources said that the CEA is now aiming for between $625 million and as much as $740 million of reinsurance coverage from this cat bond.

At the same time, we’re told that the pricing has now been fixed at the top-ends of guidance for each of the four tranches of notes.

Full details on the transaction, including the structure of the earthquake reinsurance coverage, can be found in the Deal Directory entry for this Sutter Re 2020 catastrophe bond.

As we understand it from our sources, the 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%, are targeting an issuance size of $175 million to $200 million 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%, are targeting between $100 million and $140 million of coverage 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%, target $200 million to $225 million in terms of issuance 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%, are aiming for an issuance size of $150 million to $175 million at pricing of 8.5%.

So, at a minimum the CEA looks set to secure $625 million of California earthquake reinsurance protection from the capital markets with its new Sutter Re Ltd. catastrophe bonds, at a maximum that could be $740 million, which all seems dependent on ILS fund and investor demand now.

We understand that orders for this cat bond will be allocated this week, with a first settlement later this week for the Sutter Re Ltd. Series 2020-1 notes and towards the end of May for the Series 2020-2 notes.

We’ll keep you updated on the final size of the issuance once this Sutter Re Ltd. (Series 20201- & 2020-2) catastrophe bond issuance from the California Earthquake Authority (CEA) has priced and been finalised.

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

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