The new Yosemite Re Ltd. (Series 2022-1) catastrophe bond that will protect Core Specialty-owned insurers under the StarStone brand to begin has now been priced at a slightly reduced $65 million in size, with a coupon at the top-end of guidance, Artemis can report.
When we first covered the Yosemite Re catastrophe bond on May 6th, we reported that the relatively young specialty insurance and reinsurance group Core Specialty Insurance Holdings, Inc. was aiming to secure at least $75 million of interest from investors for its first ever cat bond issuance.
But, following a three-week period of silence, we next reported earlier this week that the Yosemite Re cat bond size had to be reduced slightly, with only up to $75 million of reinsurance coverage sought.
Now, we can report that the size of this first Yosemite Re catastrophe bond issuance has been finalised and the notes priced, with just a $65 million issuance to be made.
This is the first time Core Specialty has visited the capital markets for reinsurance to protect itself, with its insurance companies under the StarStone brand to be covered to begin with.
The ceding insurers for the Yosemite Re Ltd. catastrophe bond are StarStone National Insurance and StarStone Specialty Insurance, but Core Specialty can add any of its other subsidiaries to the deal as cedents to the reinsurance the cat bond provides in future, meaning its Lancer companies can also be added.
The Yosemite Re Ltd. cat bond was launched to investors earlier in May, with a $75 million or greater single Class A tranche of Series 2022-1 notes set to be issued to provide the StarStone companies (initially) with a multi-year source of collateralized catastrophe reinsurance protection against losses from named storms and earthquakes across the United States.
The indemnity and per-occurrence based reinsurance from the Yosemite Re cat bond will run for a three year term to the end of May 2025, attaching at $300 million of losses to the covered companies, while exhaustion of coverage would be at $570 million of losses.
The Class A Series 2022-1 notes were then reduced in size and pitched at between $65 million and $75 million in size, with their initial attachment probability 2.32% and initial expected loss 1.16%.
Now, the Class A are finalised at $65 million in size, we’re told by sources.
The notes Yosemite Re is issuing initially came with coupon guidance in a range from 8.75% to 9.75%, but that was lifted and has now been priced at the top-end of 9.75%, making this yet another cat bond to see its pricing elevated during marketing.
But, while catastrophe bond market conditions are challenging right now, it’s good to see another new sponsor persevering, underscoring Core Specialty’s desire to bring capital market investors into its reinsurance program through a securitized cat bond issuance.