SageSure linked entities launch third cat bond of year, a $75m Gateway Re 2023-2

A third catastrophe bond of the year  to benefit underwriting entities linked to coastal property managing general underwriter SageSure has now been launched to investors, with a $75 million Gateway Re Ltd. (Series 2023-2) cat bond sought for the SureChoice and Elevate reciprocal exchanges.

SURE and SageSure first tapped the catastrophe bond market a year ago, securing $150 million in US named storm reinsurance through a Gateway Re Ltd. (Series 2022-1) deal to cover SureChoice, with Elevate able to be added to that deal at a reset (which may be likely to be actioned around this time of the year).

The group returned earlier this year, with a February issuance of a larger $355 million Gateway Re Ltd. (Series 2023-1) named storm cat bond, that covered both the reciprocals from the launch.

Then, the group returned in April with a $125 million Gateway Re II Ltd. (Series 2023-1) cat bond that provides reinsurance to SafePort Insurance Company, SafeChoice Insurance Company, both carriers linked to SageSure as well.

Now, the underwriting group is back again, this time seeking second and subsequent event named storm reinsurance we understand.

Gateway Re Ltd., a Bermuda domiciled SPI, is set to issue a single tranche of Series 2023-2 notes, that will be sold to catastrophe bond funds and investors and the proceeds used to collateralize reinsurance agreements between the SPI and ceding entities which are the SureChoice Underwriters Reciprocal Exchange and the Elevate Reciprocal Exchange, we’re told.

The single tranche of Series 2023-2 Class C notes are targeted at $75 million in size and will provide those reciprocals with a single wind season of reinsurance it appears, running to maturity at the end of December 2023, covering losses from named storms affecting the US states of Alabama, North and South Carolina, Louisiana, Mississippi, and Texas.

The notes will provide their named storm reinsurance to second and subsequent events only, we understand, using an indemnity trigger and on a per-occurrence basis.

The notes, are structured as zero-coupon discount notes for this issuance, and would attach at $70 million of losses, covering the reciprocal exchanges to $170 million of losses.

The currently $75 million of Series 2023-2 notes being offered by Gateway Re Ltd. will come with an initial attachment probability of 1.44%, an initial base expected loss of 0.8% and are being marketed to cat bond investors with price guidance in a range from 89% to 90% of par (a rough coupon equivalent would be between 10% and 11% therefore).

This new cat bond from the SageSure linked entities could be a response to reinsurance market conditions and a realisation that, as the group expands its business in hurricane exposed regions, securing second and subsequent event reinsurance from the capital markets could be more efficient.

It’s encouraging to see the SURE and SageSure group entities coming to market with the fourth catastrophe bond they have sponsored in just the space of one year, their third in 2023 so far, reflecting an appetite to leverage the capital markets alongside traditional reinsurance to assist in growing the business while remaining well-protected.

You can read all about this new Gateway Re Ltd. (Series 2023-2) catastrophe bond and every other cat bond deal in the Artemis Deal Directory.