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Florida Citizens return to cat bond market with Everglades Re 2013


As expected Florida’s Citizens Property Insurance, the state backed property insurer of last resort, is bringing its second catastrophe bond issuance to market with a new Series 2013-1 tranche from its Everglades Re Ltd. special purpose insurer. Florida Citizens had been planning to increase its spend on private market risk transfer and reinsurance this year, and a recent board meeting resulted in approval to pursue another catastrophe bond issuance.

Update: Further details on the Everglades Re 2013-1 cat bond can be found in our latest article here.

So it is no surprise to hear that a new cat bond has just begun marketing which is sponsored by Citizens, Everglades Re Ltd. (Series 2013-1). We’re told by sources that the transaction has an initial size of $250m and that it covers Florida hurricane risks from within the Citizens coastal account segment, the same segment of its insurance program as last years Everglades Re cat bond provided reinsurance for.

As in the first Everglades Re cat bond, issued in 2012, the transaction will provide Citizens with a source of collateralized reinsurance capacity for hurricanes on a per-occurrence basis using an indemnity trigger over a three year risk period. We’re told that this second Everglades Re cat bond covers a slightly higher risk tranche of Citizens coastal account than the first deal and as such has a slightly higher probability of attachment.

The initial attachment point for Everglades Re 2013 is just $5.139 billion of indemnity losses to Citizens and the initial exhaustion point is $5.389 billion, hence the $250m size of this deal. The attachment point is a good deal lower than last years Everglades Re 2012 transaction, which attached at $6.35 billion, so this 2013 issuance is more risky. This means that this new 2013 cat bond layer would attach before last years cat bond were a major hurricane to impact Florida and create losses above the indemnity attachment point.

We’ve been told that the Everglades Re 2013 cat bond is being marketed with a much lower coupon than last years cat bond. It will be interesting to see how investors respond to this deal and it will be very telling about the state of investor appetite in the market right now. Last years Everglades Re cat bond priced at 17.75% but we understand that this years could be marketing much lower, around 12% is the region we have heard from market sources.

We understand that Everglades Re 2013 is being marketed by Goldman Sachs, as was last years Citizens cat bond. Standard & Poor’s have assigned the single tranche of Everglades Re Series 2013-1 cat bond notes a preliminary rating of ‘B’.

That’s all we have at this stage on this new Everglades Re 2013 cat bond from Citizens. We hope to glean more details as and when it comes to market and further details become available. The transaction will be added to our catastrophe bond Deal Directory.

Update: Further details on the Everglades Re 2013-1 cat bond can be found in our latest article here.

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