Another sponsor is re-entering the catastrophe bond market after a hiatus away from it in 2023, as NJM Insurance seeks $175 million in named storm reinsurance from the capital market with a new cat bond, a Lower Ferry Re Ltd. (Series 2023-1) issuance.
NJM Insurance is the more commonly used brand name for New Jersey Manufacturers Insurance Company, an American mutual insurance group of companies, offering auto and property lines of coverage across certain states in the Northeast US.
Artemis has learned that the company is set to use a Bermuda domiciled vehicle named Lower Ferry Re Ltd. for what will be its second catastrophe bond, with that company set to issue two tranches of notes to collateralize reinsurance agreements to cover NJM Insurance.
The last time NJM Insurance was in the cat bond market was way back in 2013 with a $60 million Sullivan Re Ltd. (Series 2013-1) transaction.
The target size for this new Lower Ferry Re cat bond is at least $175 million for the issuance and this will provide a source of multi-year US named storm reinsurance protection across the Northeast US states of New Jersey, Pennsylvania, Delaware, New York, Connecticut, Maryland and Ohio.
The reinsurance protection from this Lower Ferry Re 2023-1 cat bond will cover NJM Insurance across a three-year term, to the end of June 2026, on an indemnity and per-occurrence basis, we understand.
The offering includes a $50 million Class A tranche of notes, that would attach at $600 million of losses and exhaust their coverage at $800 million, giving them an initial attachment probability of 1.03%, a base expected loss of 0.88% and they are being offered with price guidance indicating a spread of between 4.25% and 4.75%.
While a $125 million Class B tranche are riskier, attaching at $300 million and exhausting where the Class A tranche attaches, at $600 million of losses, giving an initial attachment probability of 1.93%, a base expected loss of 1.36% and they are being offered with price guidance indicating a spread of between 4.75% and 5.5%.
It’s encouraging to see yet another catastrophe bond sponsor return to the market in 2023, as insurers and reinsurers increasingly look to incorporate alternative capital within their reinsurance and retrocession arrangements.