Mercury secures $150m Luca Re 2026-1 cat bond, priced 19% below mid-guidance

Mercury General Corporation (Mercury Insurance) has achieved a strong pricing result in the catastrophe bond market, as its new $150 million Luca Re Ltd. (Series 2026-1) issuance has now been priced roughly 19% below the initial mid-point of spread guidance.

This marks one of the bigger price falls seen in the cat bond market of late, although mostly every transaction has priced down in recent weeks, while also increasing in size too, which is clearly another indication of the strong investor appetite for catastrophe bond investments at this time.

Mercury Insurance made its return to the catastrophe bond market at the end of May, initially targeting a $100 million of California wildfire and fire following earthquake protection from the capital markets, for its second cat bond sponsorship.

In our first update on this deal, we learned that the Luca Re 2026-1 catastrophe bond was being marketed at between $125 million and $175 million, while the price guidance for the notes on offer had been lowered.

In our second update, we reported that the offering size had been updated to $150 million of Luca Re Series 2026-1 Class A cat bond notes, while the price guidance was reduced further.

Then, in our third update, we learned that the offering size remained at $150 million, but the Series 2026-1 Class A notes saw its spread price guidance reduced for a third time. All of which indicates that Mercury Insurance has seemingly targeted price over size for its new cat bond.

Now priced, this $150 million Luca Re Ltd. (Series 2026-1) cat bond will provide Mercury with a 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 $150 million of Series 2026-1 Class A cat bond notes that Luca Re will now issue come with an initial expected loss of 1.09%.

These notes were originally marketed with price guidance for a risk interest spread in a range from 6.25% to 6.75%, which was later revised to a lower range of between 5.75% and 6.25%, and then revised again to a spread of between 5.5% and 5.75% and then lowered for a third time to between 5.25% to 5.5%.

We’re now told that the $150 million of notes that Luca Re will issue have been priced at the bottom of that three times reduced spread guidance, with the pricing fixed at 5.25%.

That represents a roughly 19% drop in the spread while these notes were marketed, a very strong result and return to the cat bond market for Mercury Insurance.

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.