Slide targets debut catastrophe bond with $100m Purple Re issuance

Slide Insurance Company, the full-stack homeowners property insurtech founded by former Heritage CEO Bruce Lucas, has entered the catastrophe bond market for the first time, seeking $100 million in named storm reinsurance protection through a Purple Re Ltd. (Series 2023-1) transaction.

Lucas has previous form in the catastrophe bond market, as under his tenure Heritage had sponsored a series of cat bonds under the Citrus Re name and also made valuable reinsurance recoveries from the insurance-linked securities (ILS).

Slide Insurance has been growing quickly and in the last year has also bulked out its portfolio thanks to acquisitions of policies from failing coastal property insurance carriers St. John’s Insurance Company and over 91,400 Florida homeowners policies from UPC Insurance.

With reinsurance market conditions challenging and Slide expected to need the largest tower in its short history this year, it’s perhaps no surprise to see the company looking to catastrophe bonds to lock-in multi-year reinsurance protection at this time.

Purple Re Ltd. will be registered as a special purpose insurer (SPI) in Bermuda for the purpose of issuing catastrophe bonds for Slide Insurance, we understand from our sources.

For this first issuance, Purple Re Ltd. is expected to issue a $100 million Series 2023-1 Class A tranche of notes, that will be sold to investors and the proceeds used to collateralize a reinsurance agreement between Purple Re and Slide Insurance Company.

That reinsurance will provide Slide with three-years of named storm reinsurance protection for the states of Florida and South Carolina, we’re told, with the protection provided on an indemnity trigger and per-occurrence basis.

We understand the coverage could be expanded to include additional states at future annual resets, making the reinsurance it provides more flexible for Slide as it grows its business.

The reinsurance protection is expected to attach at $315 million of losses to Slide, although inuring to underlying cover such as the FHCF for Florida at least and so the ground-up attachment for a first loss event would be closer to $750 million, we’re told.

In fact, it seems this first cat bond for Slide will sit at the very top of its reinsurance tower, occupying a $100 million layer, so there is a chance the target size could also be considered the maximum for this debut issuance from the insurtech.

We’re also told that the Class A notes issued by Purple Re Ltd. will come with an initial attachment probability of 1.96%, an initial base expected loss of 1.36% and are being offered to investors with spread pricing guidance in a range from 11.5% to 12.5%.

Which suggests a relatively high multiple-at-market, but being a Florida and southeast US coastal property risk focused issuance that is perhaps not surprising.

It’s good to see Lucas’ new insurance venture turning to the catastrophe bond market very early in its existence, as it signals that the insurer will likely look to the capital markets as a core reinsurance partner as it builds out its book of business and the reinsurance tower it needs to cover that.

You can read all about this new Purple Re Ltd. (Series 2023-1) catastrophe bond and over 900 other cat bond transactions in our extensive Artemis Deal Directory.