Coastal property managing general underwriter SageSure has now secured its latest slice of capital markets backed reinsurance, as the new $50 million Gateway Re Ltd. (Series 2023-3) catastrophe bond issuance has been priced roughly 7% below the mid-point of the initial spread guidance range.
This latest cat bond to benefit carriers linked to MGU SageSure was launched to investors at the end of June and now becomes the latest of its issues to be priced below the initial guidance.
This is the fourth time SageSure carriers have been in the catastrophe bond market this year, and it will be the fifth cat bond in just over one-year.
The MGU benefits from three Gateway Re Ltd. issuances that protect its reciprocal change underwriting vehicles, the $150m Gateway Re Ltd. (Series 2022-1), the $355m Gateway Re Ltd. (Series 2023-1), the $100m Gateway Re Ltd. (Series 2023-2), as well as one $125m Gateway Re II Ltd. (Series 2023-1) issuance for two other SageSure-linked carriers.
This new Gateway Re 2023-3 cat bond sees the MGU taking a different approach, targeting a source of county-weighted aggregate retrocessional protection, secured via its captive reinsurance vehicle Anchor Re.
This new Gateway Re Ltd. deal was initially launched with a target to secure $50 million or greater of coverage via a single tranche of Series 2023-3 Class A notes, to provide a new source of collateralized retrocession to Anchor Re.
Anchor Re operates as a reinsurance captive to SageSure’s carriers, so effectively the coverage will span much of the MGU’s book.
Having now priced and been finalised, the notes issued will provide SageSure’s carriers, with a $50 million three year source of US named storm retrocessional reinsurance protection, structured on a county-weighted industry-loss index and annual aggregate basis, across select US states, running to the end of June 2026.
The target size remained unchanged, with just the $50 million of notes having been priced at the end of last week.
The $50 million of Series 2023-3 Class A notes that Gateway Re Ltd. will issue, come with an initial base expected loss of 2.22% and were first offered to cat bond investors with spread price guidance in a range from 10.5% to 11%.
As we later reported, the spread guidance was updated for a price of between 10% and 10.5%, so targeting the low-end of guidance or below that.
Now, we’ve learned the spread has been finalised at the bottom-end of that already reduced guidance, so a 10% spread will be paid to the investors, which is roughly 7% below the mid-point of the initial price guidance range.
As a result, it is clear that SageSure has now secured another strong execution in the catastrophe bond market, as it continues on its mission to embed capital markets sources of capacity deeply within its reinsurance arrangements.
The industry-loss index nature of the coverage will prove a useful additional hedge for its catastrophe exposures that are retained by the Anchor Re captive reinsurer, and with this proof of concept cat bond now completed it will be interesting to see how SageSure could benefit from expanding on it in future, to drive greater capital efficiencies through its underwriting businesses and partnerships.