The latest catastrophe bond to be sponsored by Florida’s Citizens Property Insurance Corp. looks set to achieve pricing at or below the middle of initial guidance, as indications suggest that the $200 million Everglades Re II Ltd. (Series 2018-1) will tighten at the lower-end of the launch pricing.
This is the Florida state property insurers sixth cat bond issuance and with the transaction Florida Citizens is targeting $200m or more of Florida named storm, so tropical storm and hurricane, reinsurance protection for its coastal account exposures.
A single $200 million tranche of Series 2018-1 Class A notes remains on offer to ILS investors, with currently no sign of the deal upsizing. However, Florida Citizens has a Board meeting next week, at which it will likely discuss the make-up of its reinsurance placement for this year, so there could still be a chance this cat bond increases in size.
The notes issued will provide Florida Citizens with a three-year, fully collateralized source of annual aggregate reinsurance protection against losses from Florida named storms (so the impacts of tropical storms and hurricanes), using an indemnity trigger based on Citizens loss experience.
There is considerable room for the cat bond to be increased in size, should Citizens decide that the capital markets is offering it an attractively priced option for its reinsurance program. In fact, the notes issued in this Everglades Re II 2018-1 cat bond will cover a layer of risk almost $900 million wide, attaching at $1.735 billion and covering a percentage of losses up to $2.615 billion.
When the Class A notes, which have an initial expected loss of 1.93%, were first marketed to cat bond investors it was with price guidance in a range from 4.75% to 5.25%.
Now, sources told us that the pricing is falling towards the lower-end of guidance, with the notes now offered with a tightened coupon range of 4.75% to 5%.
Should the deal price at the bottom end of guidance that would reflect a multiple of 2.5 times the expected loss, which is roughly aligned with other Florida focused transactions this year.
The new Everglades Re II 2018-1 catastrophe bond from Florida Citizens is due to price next week and issuance would be completed the week after.