NCIUA secures upsized $600m Cape Lookout Re 2026-1 cat bond, second with resilience feature

The North Carolina Insurance Underwriting Association (NCIUA) has secured its second catastrophe bond with an integrated disaster resilience bond feature, as the Cape Lookout Re Ltd. (Series 2026-1) notes have now been priced to provide it an upsized $600 million of annual aggregate named storm reinsurance, Artemis has learned.

The North Carolina Insurance Underwriting Association was initially seeking $400 million or more in multi-year and fully-collateralized protection from this Cape Lookout Re 2026-1 deal, when the deal first emerged back at the middle of February.

As we reported in an update on the transaction, the NCIUA’s target size for this new Series 2026-1 cat bond issuance had been raised to between $575 million and as much as $600 million of reinsurance limit, while at the same time the price guidance was lowered.

Now, we’re told that the NCIUA has successfully priced and secured $600 million of reinsurance limit from this latest Cape Lookout Re catastrophe bond deal, so upsized by 50% from the initial offering target.

With both tranches of notes pricing at levels below their initial guidance, indicating another strong execution and result for the sponsor.

Notably, this Cape Lookout Re Series 2026-1 cat bond issuance now becomes the second sponsored by the NCIUA to reach $600 million in size, equalling its largest ever and also the second to feature a resilience bond feature, making it only the second 144A cat bond to include such an innovation.

A year ago, the North Carolina Insurance Underwriting Association (NCIUA) secured what was its largest catastrophe bond ever, the $600 million Cape Lookout Re 2025-1.

Last year’s cat bond from the NCIUA was also notable as the very first cat bond to include an additional resilience feature embedded in its terms, which we said at the time represented the first and only example of an insurance-linked securities (ILS) deal that also classifies as a true resilience bond.

Now, the NCIUA has equalled size and the utility in this latest sponsorship, as this new Cape Lookout Re 2026-1 catastrophe bond again comes with this embedded resilience trigger, meaning the NCIUA will pay a resilience spread that can be allocated to a fund for installing fortified roofs, much like the 2025-1 issuance.

We expect to see similar features becoming more commonplace in the catastrophe bond market, as sponsors look to leverage innovative terms within catastrophe bonds to help their policyholders become more resilient to natural perils.

With this Cape Lookout Re Series 2026-1 cat bond now priced, the $600 million of notes will provide the NCIUA with indemnity and annual aggregate reinsurance protection from the capital markets, covering losses from named storms across a three year term and three annual aggregate risk periods up to a date in March 2029.

What was initially a $100 million tranche of Cape Lookout Re Series 2026-1 Class A cat bond notes, were later offered at between $275 million to $300 million in size and we’re now told have been finalised at the upper-end of that range.

These Class A notes will come with an initial expected loss of 2.04% and were originally offered to cat bond investors with price guidance of 5.5% to 6%, which later fell to 5.25% to 5.75% and we’re now told has been finalised at the low-end of a 5.25% risk interest spread.

The Cape Lookout Re Series 2026-1 Class B notes remained at their initial $300 million in size and come with  an initial expected loss of 2.37%.

The Class B notes were first offered to cat bond investors with price guidance in a range from 6.25% to 7%, which later fell to between 6% and 6.5%, and have now been priced at the low-end again, for a 6% risk interest spread to be paid to investors.

It’s another very strong result in pricing terms and the NCIUA has again benefited from strong investor demand to upsize this latest deal, while also receiving robust support for the innovative resilience feature it has embedded into one of its catastrophe bonds for the second time.

As a reminder, you can read all about this new Cape Lookout Re Ltd. (Series 2026-1) transaction and every other cat bond ever issued in our Artemis Deal Directory.