The California Earthquake Authority (CEA) is back with a $300 million Ursa Re Ltd. (Series 2016-1) catastrophe bond offering, as the provider of earthquake insurance cover in California seeks to continue its relationship with the capital markets through a new transaction.
The CEA has been utilising the catastrophe bond market as a component of its reinsurance capital program for well over a decade, expanding its use of the capital markets as its appetite allows to diversify its sources of reinsurance capital and take advantage of capital market efficiencies.
This latest issuance sees the CEA utilising its Ursa Re Ltd. special purpose insurer for a third time, as it brings a single tranche of annual aggregate and indemnity structured notes to capital market investors.
Artemis understands that the Ursa Re 2016-1 cat bond is being marketed as a $300 million deal in a single tranche, with the goal being a three-year source of fully collateralised reinsurance protection for the CEA.
A $300 million tranche of Series 2016-1 Class A notes will be issued by Ursa Re Ltd., seeking California earthquake reinsurance protection on an aggregate basis for the CEA and using an indemnity trigger.
The Class A notes have an initial attachment probability of 2.38% and an initial modelled expected loss of 2.18%. They are being marketed to the ILS investor base with price guidance in the range of 3.25% to 4%, we’re told.
We understand that the notes will cover losses across a $500 million layer of the CEA’s reinsurance program, which perhaps signals that there is room for this Ursa Re 2016-1 cat bond to grow if investor support is strong.
We’re told that Swiss Re Capital Markets is acting as sole structuring agent and bookrunner for this cat bond transaction and that EQECAT is the risk modelling agent for the deal.
The California Earthquake Authority has been a long-term user of the capital markets for a portion of its reinsurance protection, so it is encouraging to see the insurer back with its third Ursa Re cat bond deal.