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Progressive’s new Bonanza Re cat bond could upsize slightly at top-end pricing

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The new Bonanza Re Ltd. (Series 2023-1) catastrophe bond deal from ARX Holding, the Progressive-owned parent of American Strategic Insurance Group, could now upsize to $130 million, while pricing has risen to the top-end of guidance.

american-strategic-progressive-logoThe company returned to the catastrophe bond market mid-December with a $125 million target for what will be the sixth catastrophe bond in the Bonanza Re Ltd. series of deals, that have in the main covered the risks of American Strategic Insurance Group.

The coverage has broadened out to include coverage for some of the carriers of the Progressive-owned ARX Holding Corporation, which is parent to American Strategic.

With this new Series 2023-1 cat bond, Bermuda domiciled special purpose insurer (SPI) Bonanza Re Ltd. will issue two tranches of Series 2023-1 notes for the Progressive insurance companies (we understand known as Progressive Home).

The target size has now been lifted from $125 million to as much as $130 million across the two tranches of notes.

The first will provide US named storm reinsurance across three hurricane seasons, through a Class A tranche of notes that only come on-risk at June 1st 2023 and run to the end of 2025.

The Class A notes will provide ARX Holding with indemnity and per-occurrence protection for named storm losses over this term and are now sized at between $65 million and $75 million, we understand.

With an initial base expected loss of 0.87%, the Class A notes were at first marketed with price guidance in a range from 7.5% to 8.25%, but we’re now told that guidance is fixed at the top-end of 8.25%.

The Class B notes now have a slightly raised target of $55 million in size, up from an initial $50 million, and will provide multi-peril aggregate reinsurance protection over a single year, just running through 2023, covering losses from US named storm, earthquake, severe thunderstorm, winter storm, wildfire events.

The zero-coupon Class B notes have an initial base expected loss of 1% and were first offered with pricing of 81% to 80% of principal, which roughly means a 19% to 20% rate-on-line equivalent, but we’re told this has now been fixed at the top-end at 80% of principal, so implying a 20% rate-on-line equivalent.

Both tranches therefore will come with far higher multiples-at-market than previous Bonanza Re cat bond deals, as investors continue to demand much higher spreads in 2023.

You can read all about this Bonanza Re Ltd. (Series 2023-1) catastrophe bond and every other cat bond ever issued in the Artemis Deal Directory.

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