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Pricing tempts Louisiana Citizens into Pelican Re 2013 cat bond


Louisiana Citizens Property Insurance Corporation, the coastal windstorm insurer of last resort in the state of Louisiana, has launched a new catastrophe bond deal, Pelican Re Ltd. Series 2013-1, according to sources. This is not altogether unexpected given that LA Citizens CFO Steve Cottrell had recently said that if the price was right the insurer would consider tapping the cat bond market again as part of its 2013 reinsurance renewal.

Given the way recent cat bonds have priced significantly lower than expected, with Florida Citizens Everglades Re 2013 showing how attractive cat bond pricing is right now, it makes sense that LA Citizens would give the capital markets another try. LA Citizens held a board meeting this week at which the reinsurance plans for 2013 were presented and approved, including the use of the capital markets again via another Pelican Re cat bond.

We have limited details so far from discussions with our sources, but it seems that the Pelican Re 2013-1 cat bond will look to secure at least $100m of additional reinsurance cover for LA Citizens from the capital markets for Louisiana hurricane risks. The cover will be on a per-occurrence basis we understand and the deal uses an indemnity trigger which will apparently attach at $389m of losses to Louisiana Citizens. Finally, the Pelican Re 2013-1 cat bond will have a duration of four years we understand and it’s being brought to market by Aon Benfield Securities.

The Pelican Re Ltd. Series 2012-1 cat bond issued last year has an attachment point of $200m of losses to LA Citizens, so Pelican 2013 is a little less risky and will expand the capital markets cover that LA Citizens has upwards in its reinsurance tower. We’re told to expect pricing to be lower than last year, with one of our contacts suggesting something around 7% to 8%.

Being Louisiana hurricane only this cat bond will offer a small amount of diversification to investors. As a result we expect it will be well received by the market, although given market conditions every recent cat bond has been well received regardless of perils involved.

That’s all we’ve managed to glean on this new cat bond so far. We hope to source additional details on the transaction next week and will update you if we can.

For now we’ve added these details to our Deal Directory in a new entry for Pelican Re Ltd. (Series 2013-1).

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