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Heritage P&C’s Citrus Re 2015-1 cat bond to complete at $277.5m


Florida takeout insurer Heritage Property and Casualty Insurance Co’s Citrus Re Ltd. (Series 2015-1) catastrophe bond will complete at $277.5m in size, while pricing looks mixed as it settled towards the upper end on the largest tranche.

As we wrote earlier this week, Heritage had targeted growing this catastrophe bond issuance to $327.5m, but the largest tranche has now settled at the original size of $150m, which along with the other two tranches will result in $277.5m of reinsurance for the insurer.

Citrus Re 2015-1 will be Heritage’s largest catastrophe bond by a margin, more than doubling the fully-collateralized capital markets protection already provided by its $150m Citrus Re Ltd. (Series 2014-1) and a $50m Citrus Re Ltd. (Series 2014-2).

The deal launched with three tranches of notes seeking reinsurance protection for Florida named storms initially, with an ability to update the covered area to include more states should the insurer choose, or expand into new states. The cat bond features an indemnity trigger, providing protection on a per-occurrence basis.

The Class A tranche of notes launched at $150m in size and price guidance of 4.25% to 5%, which by our next update had changed to being marketed as $150m to $200m in size and with price guidance narrowed towards the mid-point at 4.5% to 4.75%.

Now, we’re told that the Class A tranche will complete at the original $150m and the final pricing has moved to the top of that adjusted range, to settle at 4.75%.

The Class B notes were sized at $97.5m and their pricing finally moved to the bottom end of guidance at 6%, where it has stayed.

The same is true of the Class C notes, which were sized at $30m and with pricing at the bottom end of guidance at 9%, again where the pricing has stayed.

It’s interesting that the Class A notes, which are the least risky, are the ones that priced nearest the upper end of initial guidance, but this may be due to the fact that they are seen as a replacement for some of Heritage P&C’s Florida Hurricane Catastrophe Fund reinsurance protection.

For Heritage P&C, once the Citrus Re 2015-1 cat bond completes next week, it will have $477.5m of catastrophe bond sourced reinsurance protection in place. A significant use of the capital markets for what is still a young insurance company.

We’ll keep you updated as the $277.5m Citrus Re Ltd. (Series 2015-1) catastrophe bond progresses to market and you can read all about it in the Artemis Deal Directory.

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