Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Residential Re 2015-2 cat bond pricing tightens at low end of guidance


The price or coupon guidance for U.S. military mutual insurer USAA’s Residential Reinsurance 2015 Ltd. (Series 2015-2) catastrophe bond has tightened at the low end of the marketed range, as investors once again show their support for this prolific sponsor.

The Residential Re 2015-2 is the 25th time that insurer USAA has looked to the capital markets and support from insurance-linked securities (ILS) investors to secure a source of fully collateralized reinsurance capacity.

The 2015-2 deal sees USAA looking for at least $100 million of reinsurance protection over a four-year term to cover certain losses from U.S. tropical cyclones, earthquakes (plus fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption and meteorite impact, on a per-occurrence basis and using an indemnity trigger.

More details on this cat bond can be found in our article announcing the launch of the transaction here, as well as in our catastrophe bond Deal Directory.

When the deal launched to investors the single tranche of $100 million Series 2015-2 notes were marketed to ILS investors with a price guidance range of 7% to 7.75%.

According to sources, that range has now been narrowed at the bottom end of price guidance, to 7% to 7.25%, as the book builds and nears closing later this week and investors clearly showed their support helping the guidance reduce.

With the notes having an initial expected loss of 3.26% at the base case the notes now look likely to pay investors a multiple of 2.15 times the EL at the low end of the tightened guidance, or 2.22 times EL at the new upper end of the range.

The sensitivity case expected loss is 3.65%, which would give a multiple of 1.92 times the EL at the lower end or 1.97 times at the upper end of the new range.

We understand that the Residential Re 2015-2 cat bond is expected to be priced at the end of this week, with completion slated for the first week of December. We’ll updated you when the final details emerge.

Read all about USAA’s 25th catastrophe bond Residential Reinsurance 2015 Ltd. (Series 2015-2). You can read about all 25 cat bonds sponsored by USAA in the Artemis Deal Directory.

Register today for ILS Asia 2023, our next insurance-linked securities (ILS) market conference. Held in Singapore, July 13th, 2023.

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