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Heritage appears to get more payouts from Citrus Re cat bond series


Heritage Insurance Holdings, Inc., the Florida focused property and casualty insurer, has benefited from more reinsurance recoveries under its Citrus Re catastrophe bond series of deals, with more tranches seeing principal reductions, one of which has now been allowed to mature.

heritage-insurance-logoHeritage has been making reinsurance recoveries under some of its older catastrophe bonds, as it continued to deal with losses from 2017 and 2018 hurricanes including Irma.

Some of the insurers cat bonds began to pay out early in 2019, as we explained at the time, followed by a further reinsurance recovery as another tranche of Citrus Re notes seemed to pay out in early April last year.

More recently, the $125 million Citrus Re 2017-1 Class A tranche of cat bond notes saw its remaining principal reduced to just slightly under $36.7 million, as Heritage seemed to release some of the held collateral back to investors in the cat bond.

The latest happenings in Heritage’s Citrus Re catastrophe bond series are related to some of the tranches that had already seen reductions in their principal.

First the Citrus Re Ltd. (Series 2015-1) Class B tranche of notes which already had its principal reduced by around half (unsure of this was a recovery or redemption) to $45.14 million.

This tranche experienced a further reduction in remaining principal down to just $3.05 million and has since been allowed to mature. While we can’t be sure if this was due to a reinsurance recovery or a return of capital, it seems more likely that another recovery has been made by Heritage, hence it’s willingness to allow this tranche to finally mature some 30 months after the first event that impacted it (hurricane Irma).

Next, the Citrus Re Ltd. (Series 2016-1) Class D-50 tranche of notes which had already seen its principal reduced to $77.49m. This tranche has faced another principal reduction, hard to say for certain if this is due to a reinsurance recovery, with the amount outstanding now falling to $61.3 million and those remaining notes priced for bids of around 20 cents on the dollar.

The fact these Citrus Re 2016 A notes remain priced so low might suggest that another small reinsurance recovery has been made.

Finally, the Citrus Re Ltd. (Series 2017-1) Class A tranche of notes which we mentioned earlier, as these notes have faced another reduction in remaining principal, dropping the remainder to some $31.68 million and with those notes priced at just 10 cents on the dollar it suggests another reinsurance recovery has likely been made.

It’s notoriously difficult for us to track all of the reinsurance recoveries as they happen under these legacy and extended catastrophe bond tranches, but we do our best over in our directory of catastrophe bond losses and cat bonds considered at-risk.

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