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Citrus Re catastrophe bond grows to $150m, pricing drops, narrows


Yet again a new catastrophe bond deal has upsized while pricing down. This time it’s Citrus Re Ltd. (Series 2014-1), sponsored by Florida Citizens takeout insurer and first time cat bond sponsor Heritage Property and Casualty Insurance Co.

The Citrus Re catastrophe bond will provide Heritage with three-years of fully-collateralized reinsurance for named storms, initially in Florida but with the ability to expand the coverage to include additional U.S. states after the annual reset. Citrus Re features an indemnity trigger and will provide Heritage with per-occurrence based protection.

When the Citrus Re cat bond launched just over a week ago it was being marketed as a $100m tranche of notes. Artemis understand that this has grown by 50% and Citrus Re is now sized at $150m.

The price guidance for Citrus Re has been dropped to below the originally marketed interest spread range and narrowed. The deal launched with pricing guidance of 4.75% to 5.5% above the yield of the collateral investments. This has now dropped right down to a range of 4.25% to 4.75%, we understand.

Based on that price drop Heritage could see pricing come in as much as 17% lower than the mid-point of initial expectations if it prices right down at 4.25%, representing quite a saving for this first time cat bond sponsor. Even if it prices at the middle of the new range, at 4.5%, it would still represent a drop in pricing of close to 12%.

The Citrus Re catastrophe bond is expected to price later this week and complete the week after. We will update you as it comes to market and you can find full details of Citrus Re Ltd. (Series 2014-1) in the Artemis Deal Directory.

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