Louisiana Citizens Property Insurance Corporation, the non-profit state mandated insurer of last resort, is back in the catastrophe bond market for its first transaction located in Singapore, with a currently $50 million Catahoula Re Pte. Ltd. (Series 2020-1) deal.
Louisiana Citizens has been better known for its Pelican Re series of catastrophe bond deals through which it opened up access to the capital markets as a source of reinsurance.
After five cat bonds named Pelican Re, between 2012 and the last issued in 2018, Louisiana Citizens has changed the name of its issuing vehicle to Catahoula Re, named after an American dog breed that became the state dog of Louisiana.
Catahoula Re Pte. Ltd. has been registered in Singapore as a special purpose reinsurance vehicle (SPRV), we’re told, as Louisiana Citizens shifts its normal domicile of choice to the country.
As a result, we assume that Louisiana Citizens is taking advantage of Singapore’s grant program for insurance-linked securities (ILS) issuers, to reduce the costs of transacting somewhat.
Louisiana Citizens has previously sponsored cat bonds in 2012 with a $125 million Pelican Re Ltd. (Series 2012-1) deal, then ot returned in 2013 with the $140 million Pelican Re Ltd. (Series 2013-1), in 2015 with the $100 million Pelican III Re Ltd. (Series 2015-1), in 2017 with a $100 million Pelican IV Re Ltd. (Series 2017-1) transaction and most recently in 2018 with a $100 million Pelican IV Re Ltd. (Series 2018-1) deal.
For 2020 Louisiana Citizens is looking to expand its capital markets backed reinsurance coverage for the catastrophe perils of Louisiana named storms (so tropical cyclones and hurricanes) as well as severe thunderstorms.
It’s the second transaction where LA Citizens has sought reinsurance coverage for the two perils and we’re told this new Catahoula Re cat bond will sit directly below the Pelican IV Re 2018 cat bond it the insurers reinsurance tower.
Catahoula Re Pte. Ltd. will seek to issue a single tranche of Series 2020-1 catastrophe bond notes that will be sold to investors and the proceeds used to fund and collateralise a reinsurance agreement to provide the coverage.
For now, the Series 2020-1 Class A notes are targeting just a $50 million issuance, although that could certainly grow if investor demand allows, we understand.
The notes will provide LA Citizens with per-occurrence and indemnity trigger based reinsurance cover for named storm and severe thunderstorm risks across a three-year term.
We’re told the notes will attach at $260 million of losses and exhaust at $360 million, so covering a $100 million layer and providing room to upsize if investor demand is sufficient to support it.
The notes will have an initial expected loss of 0.91% at the base case, we’re told, which translates to them being offered to cat bond investors with a coupon of 3% to 3.5%.
The Pelican IV Re cat bond notes have been moved up in the tower slightly, having attached at $300 million of losses at issuance, but had a 0.97% expected loss and coupon of 2.25% at that attachment level when issued.
Hence it’s clear this Catahoula Re cat bond will pay a higher rate of return to investors in it, but it will be interesting to watch how the book builds at this time given the pressures on investment markets worldwide.
We’ll update you as this new Catahoula Re Pte. Ltd. (Series 2020-1) catastrophe bond deal comes to market for Louisiana Citizens Property Insurance Corporation and you can read all about it and every other cat bond in our Deal Directory.