NJM Insurance has increased its appetite for named storm reinsurance from the capital market with its new catastrophe bond, now aiming for up to $275 million in protection with the Lower Ferry Re Ltd. (Series 2023-1) issuance.
The last time NJM Insurance sponsored a cat bond was back in 2013 with a $60 million Sullivan Re Ltd. (Series 2013-1) transaction.
For 2023, the insurer has registered a Bermuda domiciled vehicle named Lower Ferry Re Ltd. that will be used to issue two tranches of notes, the proceeds of the sale of which will collateralize two named storm reinsurance agreements for NJM Insurance and its subsidiaries.
At launch earlier in June, the target size for this new Lower Ferry Re cat bond was for least $175 million of three-year US named storm reinsurance protection across the Northeast US on an indemnity and per-occurrence basis.
Now, we’re told that target size is being pitched at up to $225 million, with each of the tranches of notes now having enlarged size guidance.
What was a $50 million Class A tranche of notes are now pitched at up to $75 million in size, we understand.
The Class A notes have an initial base expected loss of 0.88% and were first offered with price guidance indicating a spread of between 4.25% and 4.75%, but that has now been narrowed to 4.25% to 4.5%, we’re told.
What was a $125 million Class B tranche that are a little riskier are now pitched at up to $150 million in size, sources said.
The Class B notes have an initial base expected loss of 1.36% and were first offered with price guidance indicating a spread of between 4.75% and 5.5%, but this has now been fixed at 5%, we hear.
As a result, it seems NJM Insurance is on its way to securing its new catastrophe bond at a larger size than the initial target, while the notes look set to price lower than at first anticipated for the B’s and at the mid-point or lower for the A’s.