Mercury raises Cal fire reinsurance target to $125m-$175m with second Luca Re cat bond

Mercury General Corporation (Mercury Insurance), the California headquartered insurer, is now aiming to upsize its second 144A catastrophe bond sponsorship, with the target for fire reinsurance limit from the Luca Re Ltd. (Series 2026-1) issuance now having risen to between $125 million and $175 million, Artemis can report.

Mercury Insurance returned to the catastrophe bond market towards the end of May, initially seeking $100 million of California wildfire and fire following earthquake protection from the capital markets with its second 144A cat bond sponsorship.

Like so many sponsors in the market over recent months, we now understand that Mercury is both looking to upsize on the protection it receives from the second Luca Re cat bond, while also targeting lower pricing for the notes.

Mercury Insurance sponsored its debut 144A catastrophe bond in 2025, when it secured $150 million of California fire reinsurance protection from the capital markets from the first Luca Re 2025-1 deal.

Mercury was already familiar with private cat bonds, having previously sponsored four private catastrophe bonds under the Randolph Re name, with a partial recovery made from the Randolph Re 2024-1 issuance after the devastating Los Angeles wildfires in early 2025.

Read about all of Mercury Insurance’s catastrophe bonds in our extensive Deal Directory.

For Mercury’s second 144A catastrophe bond sponsorship, Luca Re Ltd. a special purpose insurer (SPI) based in Bermuda is now offering a single tranche of Series 2026-1 Class A notes sized at between $125 million and $175 million, up from the initial $100 million target.

The Series 2026-1 cat bond notes that Luca Re is offering will provide Mercury with a roughly three-year source of collateralized reinsurance protection against wildfire and fire-following earthquake losses in the state of California, on an indemnity trigger and per-occurrence basis.

The now between $125 million and $175 million Series 2026-1 Class A tranche of notes that Luca Re is offering to investors come with an initial expected loss of 1.09%.

They were first offered with price guidance for an initial risk interest spread in a range from 6.25% to 6.75%, but we’re now told that has been revised and updated at the lower range of between 5.75% and 6.25%, as Mercury targets stronger price execution.

The Series 2025-1 cat bond notes issued by Luca Re came with an initial expected loss of 1.08%, roughly the same as this new issuance, but priced to pay investors a higher spread of 7.25%.

As a reminder, you can read all about this Luca Re Ltd. (Series 2026-1) catastrophe bond and every other cat bond deal in the extensive Artemis Deal Directory.