Price guidance falls a third time for Mercury’s second Luca Re cat bond

We’ve learned that Mercury General Corporation’s (Mercury Insurance’s) new Luca Re Ltd. (Series 2026-1) catastrophe bond issuance has seen its price guidance range now fall for a third time, with the company looking set for strong execution for its second 144A cat bond deal.

As Artemis previously reported, Mercury Insurance made its return to the catastrophe bond market at the end of May, with an initial target to secure $100 million of California wildfire and fire following earthquake protection from the capital markets.

In our first update on this deal, we reported that the Luca Re 2026-1 catastrophe bond was being marketed at between $125 million and $175 million, while the price guidance for the notes on offer had been lowered.

Then, in our second update, we learned that the offering size had been updated to $150 million of Luca Re Series 2026-1 Class A cat bond notes, while the price guidance was reduced further.

Now, we’ve learned that the cat bond has seen its spread price guidance reduced for a third time, and again an updated range is being offered, as Mercury Insurance continues to target strong price execution for its latest catastrophe bond sponsorship.

Special purpose insurer Luca Re Ltd. continues to offer a $150 million single tranche of Series 2026-1 Class A notes to cat bond investors, which is still up from the initial $100 million target.

The $150 million of Series 2026-1 cat bond notes that Luca Re is offering will provide Mercury with a three-year source of collateralized reinsurance protection against wildfire and fire-following earthquake losses in the state of California, on an indemnity trigger and per-occurrence basis.

The $150 million of Series 2026-1 Class A cat bond notes that Luca Re will issue come with an initial expected loss of 1.09%.

Initially, these notes were marketed with price guidance for a risk interest spread in a range from 6.25% to 6.75%, which was later revised to a lower range of between 5.75% and 6.25%, and then revised again to a spread of between 5.5% and 5.75%.

Now, we’ve learned from sources of a further reduction in price guidance, with a range of 5.25% to 5.5%, as Mercury Insurance continues to seek stronger price execution.

As a result, this Luca Re Ltd. (Series 2026-1) cat bond is likely to price well-below the initial guidance for Mercury Insurance, all of which reflects the strong investor demand that’s being seen within the cat bond market as well as growing confidence in the sponsor and the covered peril.

As a reminder, you can read all about this Luca Re Ltd. (Series 2026-1) catastrophe bond and every other cat bond deal in the extensive Artemis Deal Directory.