SURE & Elevate’s Gateway Re 2024-3 cat bond issuance cancelled

We’ve learned that the proposed up to $100 million Gateway Re Ltd. (Series 2024-3) named storm catastrophe bond issuance, to provide reinsurance to the SureChoice and Elevate reciprocal exchanges, has been cancelled and won’t be issued in response to current market conditions.

The SureChoice and Elevate reciprocal exchanges are underwriting entities linked to expansive coastal MGU SageSure, and this would have been their third joint catastrophe bond of the year.

In fact, it would have been the fifth catastrophe bond to protect both of those underwriting reciprocal exchanges on a joint basis since early 2023.

There are other cat bonds in the Gateway Re series from SageSure that also extend their coverage to the reciprocals, including a still in the market Gateway Re Ltd. (Series 2024-4) second-event index trigger bond.

This specific issuance that has now been cancelled, saw Gateway Re Ltd. seeking to issue a single tranche of Series 2024-3 Class AAA cat bond notes, sized at up to $100 million, to provide collateralized reinsurance to the reciprocals against losses from named storms affecting the US states of Alabama, North and South Carolina, Louisiana, Mississippi, and Texas.

We’re now told that this Gateway Re 2024-3 cat bond issuance has been withdrawn and the notes will not be issued, which sources said is in response to market conditions.

We understand that this cat bond was designed to sit high up and extend the top of the reinsurance tower for the cedents. We had originally reported that they were more risk remote notes, sitting in a layer higher up than previous cat bonds for the reciprocals.

It’s said that the coverage was not a core requirement, as it was positioned beyond where the rating agency requirements deemed reinsurance was required to be placed up to.

As a result of which, we’re told a commercial decision has been taken, given how the cat bond market has moved in terms of its pricing in recent weeks and as it was expected the notes would not have priced within their original guidance, a decision has been taken to cancel the issuance.

It’s also said that some traditional reinsurance has been secured at this higher level anyway, but in a lower volume than the cat bond might have provided.

It’s a signal of a sophisticated cat bond sponsor opting to step away when pricing was deemed less conducive. Had the issuance got into the market a month or so prior, the situation may not have been the same and market conditions may have been kinder.

Still, SageSure and its underwriting entities are still in the market with the second-event index trigger cat bond and we expect we’ll see more from the Gateway Re series in due course, as the expansive MGU continues to leverage the capital markets as a source of reinsurance.

Demonstrating how much of a commitment SageSure and its underwriting entities have made to the catastrophe bond market to-date, since their first issuance in May 2022 the company has sponsored $1.16 billion of catastrophe bonds already and is already positioned in tenth place in our catastrophe bond sponsor leaderboard.

At the rate the group has been bringing new Gateway Re deals to market, we expect it will move up the leaderboard over time, as SageSure and its underwriting entities look set to make catastrophe bonds a significant component of their reinsurance arrangements.

This is the second catastrophe bond issuance to be withdrawn due to market conditions in recent weeks, after Ariel Re pulled its latest Titania deal due to pricing.