USAA has begun marketing a new series of catastrophe bond notes to add to its Residential Reinsurance 2010 Ltd. transaction. We assume that USAA is seeking to take advantage of investor appetite to secure further coverage for its U.S. peril exposure through this additional issuance.
Standard & Poor’s has given the Class 1 Series 2010-II notes a preliminary rating of ‘BB’, the same rating as the previous rated tranches of Residential Re 2010 which S&P say carry the same risk profile. So we assume that this new series of notes is designed to provide an additional level of cover for USAA’s hurricane, earthquake, severe thunderstorm, winter storm and wildfire exposures in the U.S.
As this is the first transaction in a few months to contain U.S. hurricane risks it will be interesting to see how well received it is by investors. We believe this issuance to be targeting between $100m-$200m in additional cover for USAA.