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NCIUA’s new Cape Lookout Re cat bond to more than double to $250m


The North Carolina Insurance Underwriting Association (NCIUA) looks set for strong execution within the catastrophe bond market with its first issuance of 2021, as the target for its new Cape Lookout Re Ltd. (Series 2021-1) transaction has been more than doubled to $250 million in size.

North Carolina map and flagThis is the latest catastrophe bond to show strong execution, both in terms of size and pricing, as the Cape Lookout Re 2021-1 cat bond also looks set to price at or below the bottom of initial guidance.

The North Carolina Insurance Underwriting Association (NCIUA) is a coastal property insurance underwriting pool for the state of North Carolina.

It returned to the cat bond market at the end of February, targeting at least $100 million of collateralized catastrophe reinsurance with this new issuance.

Investor demand looks set to help the NCIUA secure a much larger slice of reinsurance though, with the target size now fixed at $250 million, sources told us.

So, the NCIUA’s special purpose insurer (SPI), Cape Lookout Re Ltd., will now look to secure investor demand for a $250 million  tranche of notes, that will be sold to investors to secure multi-year and multi-peril collateralized reinsurance for the insurance underwriting pool.

The now likely $250 million of reinsurance coverage will protect the NCIUA against certain losses from named storms and severe thunderstorms to its portfolio in the state of North Carolina, across a three-year term and on an annual aggregate and indemnity trigger basis.

The targeted $250 million of Series 2021-1 Class A notes have an initial expected loss of 1.04% and were initially marketed to cat bond investors with coupon guidance in a range from 3.5% to 4%.

We understand that this price guidance has now dropped and the range been narrowed, to 3.25% to 3.5%.

The catastrophe bond market continues to show signs that pricing has levelled off, with many recent issues upsizing and coming in below spread guidance.

Issue spreads remain up year-on-year it seems so far, risk adjusted, although we will need to see how cat bonds for loss impacted regions price and more of this years issuance pipeline come to market for accurate comparisons with last year to be made.

It’s certain though, that catastrophe bonds are offering a competitive priced source of catastrophe reinsurance at this time, which should help to see other deals come to market and those planned upsizing.

We’ll keep you updated as this latest catastrophe bond comes to market and you can read all about the Cape Lookout Re Ltd. (Series 2021-1)  transaction and every other cat bond in our Artemis Deal Directory.

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