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FEMA’s new FloodSmart Re 2023-1 cat bond may upsize, as pricing drops


The new FloodSmart Re Ltd. (Series 2023-1) catastrophe bond that is being issued for the U.S. Federal Emergency Management Agency (FEMA) entity the National Flood Insurance Program (NFIP), could upsize to $275 million in size, while the pricing has been reduced to the low-end of initial guidance.

fema-logoThis is FEMA’s sixth issuance of a FloodSmart Re Ltd. catastrophe bond transaction and when the deal was launched to investors roughly a fortnight ago, the target was to secure $250 million or more in flood reinsurance protection from the capital markets.

Now, the target size has been lifted slightly, with up to $275 million of capital markets backed flood reinsurance being sought, across the two tranches of notes being issued.

The reinsurance protection from this FloodSmart Re 2023-1 cat bond will cover the NFIP across a three-year term and on an indemnity and per-occurrence trigger basis, providing protection against flood losses arising from US named storm events.

The reinsurance flows via Hannover Re again, as the global reinsurer acts as a front to the capital markets for the NFIP.

Read more about the transaction here.

When it launched, a $200 million Class A tranche of notes were on offer, but we’re now told that this tranche of notes are being pitched as up to $225 million in size.

The Class A notes come with an initial base expected loss of 5.35% and were first offered to investors with spread guidance in a range from 16.25% to 17.25%, but we’re told that this guidance has been reduced to the lowest-end of 16.25%.

The Class B notes remain at $50 million in size, we’re told.

They come with an initial base expected loss of 6.83% and were first offered to investors with spread guidance in a range from 21.5% to 22.5%, but this has now also been reduced to the lowest-end of initial guidance, at 21.5%, we understand.

As with many other recent cat bond sponsors, it seems FEMA could be optimising for pricing over size with its latest issuance, which given the drop in guidance appears likely to be successful.

You can read all about this new FloodSmart Re Ltd. (Series 2023-1) catastrophe bond and every other cat bond ever issued in our extensive Artemis Deal Directory.

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