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Citizens more than doubles Lightning Re cat bond target to $500m, at reduced pricing


Florida’s Citizens Property Insurance Corporation looks set to more than double the size of its new catastrophe bond issuance, as the target for its first industry loss trigger cat bond, the Lightning Re Ltd. (Series 2023-1) issuance, has now been lifted to between $400m and $500m, Artemis has learned.

florida-citizens-lightning-re-cat-bondAt the same time, Florida Citizens appears to have been very well-received by cat bond investors, with the pricing guidance having been tightened and lowered to below the originally marketed range.

Florida Citizens returned recently with what will be its tenth full 144a catastrophe bond, but its first structured to use an industry-loss trigger.

As we explained, with Florida Citizens having very broad exposure across Florida, the residual market insurer is exposed to any major hurricane that struck the state, making an industry loss index trigger a viable alternative type of reinsurance protection.

At its launch to investors, Lightning Re Ltd. was targeted to issue a single $200 million or larger tranche of Series 2023-1 Class A notes, to provide Citizens with capital markets backed reinsurance protection on a PCS industry loss index and annual aggregate trigger basis.

Now, Artemis understand that strong investor appetite, as well as Citizens desire and need for more reinsurance, has seen the targeted size of this first Lightning Re cat bond at least double, with between $400 million and $500 million of cover now sought from this issuance.

That is the most significant upsizing of a catastrophe bond since hurricane Ian last year, another strong signal that the cat bond market is building momentum in the wake of that storm and that investor appetite is also strengthening.

Another strong signal can be found in the pricing as well, with it falling during this Lightning Re cat bond’s marketing period.

At launch to investors, the now up to $500 million of Series 2023-1 Class A notes that Lightning Re Ltd. will issue, with their initial expected loss of 1.8%, were offered to cat bond funds and investors with price guidance in a range from 11.5% to 12.5%.

Now, sources have told Artemis that the notes are being offered with revised and reduced price guidance, at a range of 11% to 11.5%.

Meaning, Florida Citizens is set to at least double the size of its first industry-loss trigger Lightning Re cat bond, and could see the deal price below the initial price guidance, which would be a very strong result for the insurer.

The pricing remains high though, compared to prior year deals from Citizens, but for an aggregate and industry-loss trigger deal focused on a single-state and peril this is a unique cat bond in the market, so challenging to compare.

Either way, for Florida Citizens, in the current reinsurance market environment, this looks set to be a very successful visit to the catastrophe bond market and an example of strong execution and clearly shows the cat bond market is wide-open for business.

You can read all about this new Lightning Re Ltd. (Series 2023-1) catastrophe bond sponsored by Florida’s Citizens Property Insurance Corporation and view details of more than 900 cat bonds in the extensive Artemis Deal Directory.

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