More details on State Farm’s new $1.5bn Merna Re cat bonds, all annual aggregate protection

We have now sourced additional details about the recent $1.5 billion of catastrophe bond’s sponsored by US insurer State Farm. We’ve learned that the entire meaningful reinsurance limit provided by these newly issued notes is designed to provide the insurer with multi-year and multi-peril annual aggregate protection.

We broke the news last week that State Farm had secured a significant $1.5 billion of reinsurance limit from its latest venture into the catastrophe bond market with a Merna Re 2026-1 issuance.

However, at the time we got the issuing entity’s name slightly wrong, originally citing it to be Merna Re Enterprise Ltd., a Bermuda special purpose insurer established in 2025 and used for a cat bond for State Farm last year.

We now know that the new $1.5 billion of cat bond notes issued in May 2026 were actually from Merna Re Enterprise II Ltd., another Bermuda SPI but one more recently registered on the island that we had previously reported on back in March.

We’ve now updated our previous article to reflect the correct name for the SPI that issued the new cat bonds for State Farm and amended our Deal Directory entry for the issuance to be Merna Re Enterprise II Ltd. (Series 2026-1).

In our article last week we explained that two tranches of Series 2026-1 notes have been issued by what we now know to be Merna Re Enterprise II Ltd.

Both tranches are $750 million in size, for total reinsurance limit secured for State Farm of $1.5 billion, which makes this the joint-third largest ever cat bond sponsorship in a single visit to the market (the insurer still holds the record for its $1.55 billion visit to the cat bond market in 2025).

These Merna Re Enterprise II 2026-1 cat bond notes will provide State Farm with a $1.5 billion roughly three year source of collateralized reinsurance protection, running to maturity in early July 2029

When we learned about this deal we did not know the exact perils covered, although we assumed they would likely cover multiple perils on an indemnity basis as is typical of State Farm’s recent cat bonds, or whether the $1.5 billion of coverage was per-occurrence or annual aggregate.

We did know that a $750 million tranche of Series 2026-1 Class A notes would pay investors an initial risk interest spread of 6.25%, while a $750 million tranche of Series 2026-1 Class B notes would pay an initial risk interest spread of 9.25%, leading to the assumption the latter would be a riskier layer of State Farm’s reinsurance arrangements.

Now we have learned that both tranches of notes will provide State Farm with the roughly three years of reinsurance protection on an annual aggregate and indemnity trigger basis.

While we’ve been told that the covered perils and regions for these cat bond tranches are both US and DC (excluding California) windstorm, hail, tornado, hurricane, tropical cyclone, earthquake and winter storm.

We’ve also learned that the Class A notes have an initial attachment probability of 1.99% and initial expected loss of 1.58%, while the Class B notes attachment probability is 4.04% and expected loss 2.62% (again underscoring the fact the Class B layer is the riskier of the two).

So, with the new $1.5 billion of Merna Re Enterprise II Series 2026-1 cat bonds, State Farm has secured a meaningful amount of annual aggregate and multi-peril reinsurance protection, covering losses across the majority of the United States.

Thanks to this new cat bond sponsorship, State Farm occupies the top spot in the Artemis cat bond sponsor leaderboard by quite a margin, at $4.5 billion of cat bonds outstanding as of today.

The insurer has $450 million of cat bonds scheduled to mature this year, so that figure will fall to $4.05 billion around early July, but likely keeping State Farm in the top position as the sponsor with the most cat bond protection in-force.

Read all about this new $1.5 billion Merna Re Enterprise II Ltd. (Series 2026-1) catastrophe bond issuance from State Farm in the Artemis Deal Directory, where you can read about and analyse details of almost every cat bond transaction.