Florida’s Citizens Property Insurance Corporation’s latest catastrophe bond transaction, Everglades Re Ltd. (Series 2014-1), has grown again to hit a new record at $1.5 billion in size, a 275% upsizing from the $400m the deal was initially launched at.
Everglades Re 2014-1 is the largest catastrophe bond transaction ever issued, breaking new ground for the cat bond and ILS market and sending a clear message that ILS investors, along with an increasing number of fixed income specialists, can support the needs of even the largest reinsurance and risk transfer cedents.
Just two days ago Everglades Re 2014-1 grew to $1.25 billion while the price guidance was narrowed and moved towards the upper end. The pricing guidance for the Everglades Re 2014 cat bond started at 6.5% to 7.75%, which moved to 7.25% to 7.5% two days ago but has now settled at the upper end of that narrowed range at the 7.5% mark.
This is the first catastrophe bond which has not priced at the low-end of the launch price guidance range in a long time, in fact most recent cat bonds have priced at a point below the initial price guidance. This shows that investors were not willing to support Citizens reinsurance needs at any cost and perhaps indicates that a floor has been reached for Florida hurricane cat bond capacity rates.
Once this new Everglades Re 2014-1 cat bond is in force Florida Citizens will have $1.75 billion of reinsurance protection from the capital markets via its two catastrophe bond transactions for the 2014 hurricane season. With Florida Citizens also likely to use other fully-collateralized sources of protection in its reinsurance program, the capital markets will far outweigh the participation of traditional reinsurers in what was once a key cedent program for the traditional players.
The $1.5 billion Everglades Re Ltd. (Series 2014-1) catastrophe bond is expected to complete in the first week of May, we understand. You can read much more information on this transaction in the Artemis Deal Directory.
Q1 2014 Catastrophe Bond & ILS Market Report – A Record Quarter
This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the first-quarter of 2014, looking at the new risk capital issued and the composition of the transactions completed during Q1 2014. Download your copy here.