Core Specialty gets upsized $95m Yosemite Re cat bond priced at top-end

Core Specialty Insurance Holdings, Inc. has now finalised its new Yosemite Re Ltd. (Series 2025-1) catastrophe bond, we are told, securing the 27% upsized $95 million target for catastrophe reinsurance from the deal, while the notes were priced at the top-end of initial guidance.

Core Specialty returned to the cat bond market in February, with its second catastrophe bond sponsorship having an initial target to secure $75 million of US peak peril reinsurance protection.

Like its debut cat bond, the $65 million Yosemite Re 2022-1 issuance, this second cat bond for the company is designed to provide reinsurance to protect a book of excess and surplus (E&S) focused insurance, supporting StarStone US underwriting entities StarStone National Insurance and StarStone Specialty Insurance at first.

We later learned from sources that the size target for this Yosemite Re 2025-1 cat bond had been increased, with between the initial $75 million and $95 million of protection then being sought by Core Specialty for its StarStone US entities.

Alongside that upsized target, the price guidance for the Series 2025-1 Class A notes that Yosemite Re is issuing had also been updated, fixed at the upper-end of the initial range.

Now, Artemis has learned that the size of this issuance will be $95 million, so the upper end of the targeted range, while the pricing has now been finalised for the notes at that top-end of initial guidance.

Yosemite Re Ltd., the Bermuda based special purpose insurer (SPI), is issuing the now confirmed to be $95 million of Series 2025-1 Class A notes to provide the StarStone US entities (initially) with a multi-year source of collateralized indemnity and per-occurrence based catastrophe reinsurance protection against losses from named storms and earthquakes across the United States over a three year term running to the end of May 2028.

The now confirmed as $95 million tranche of Class A Series 2025-1 notes come with an initial expected loss of 1.80% and were at first offered to cat bond investors with spread price guidance in a range from 6.5% to 7.25%.

As we reported, that price guidance was later fixed at the top-end of 7.25%, which we understand has now been finalised and is the level of spread investors will receive for allocating to this new cat bond.

As a result, the multiple-at-market of spread to expected loss (EL) for these Yosemite Re 2025-1 cat bond notes will be approximately 4.03 times the EL

The soon to mature Yosemite Re 2022-1 cat bond issuance, which this seems a renewal of sorts for, had an initial expected loss of 1.16% and priced to pay investors a spread of 9.75%, so paid a multiple of roughly 8.4 times the EL.

As we previously stated, that debut Yosemite Re issuance was at the time a very rare cat bond covering excess and surplus line property risks. While that still remains a less-frequently seen exposure base in the cat bond market, it is something the investor base has become more accustomed to seeing, so there was likely to have been some novelty premium paid for the first deal in the series.

Core Specialty will be satisfied with both the size and pricing of its second catastrophe bond for the StarStone US underwriting entities, having upsized this issuance by 27% while marketing it, and even with it priced at the upper-end the spread being paid represents greater value in reinsurance cost terms than its previous cat bond sponsorship had achieved.

Read all about this Yosemite Re Ltd. (Series 2025-1) catastrophe bond and every other cat bond deal issued in our extensive Artemis Deal Directory.