USAA now targets up to $825m of reinsurance from Residential Re 2026-1 cat bond

US military mutual insurer USAA is now aiming to upsize its new catastrophe bond, with the revised target now being to secure between $800 million and as much as $825 million of reinsurance protection from the Residential Reinsurance 2026 Limited (Series 2026-1) issuance, Artemis has learned.

USAA made its return to the catastrophe bond market for its 47th sponsorship at the beginning of April, with the company initially targeting $600 million of reinsurance from this Residential Re 2026-1 issuance.

At the time, we said that at $600 million this would equal USAA’s largest cat bond sponsorship from back in 2007.

However, given that the target size for this Residential Re 2026-1 issuance has now risen by between $200 million and $225 million, it appears that this new deal is highly likely to become USAA’s largest cat bond sponsorship ever.

You can read about every one of USAA’s 46 issuances under the Residential Re name, as well as one named Espada Re cat bond, in our extensive Deal Directory.

We’ve learned that some adjustments have been made to the size and pricing for each of the three tranches of notes on offer for this Res Re 2026-1 issuance.

As we’ve explained before, this Residential Re Series 2026-1 catastrophe bond could also be the first from USAA to have a tranche of notes solely focused on Florida. But it’s important to note data is lacking on some of the Res Re cat bonds sponsored more than two decades ago, so it is hard to be certain of that fact.

The three tranches of Series 2026-1 notes will provide USAA with roughly four years of indemnity based reinsurance protection against losses from the same range of perils that typically feature in its catastrophe bond deals, being U.S. tropical cyclones, earthquakes (plus fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact and other perils.

Both the Class 14 and Class 15 tranches will provide annual aggregate protection across the US and feature a $60 million event deductible, while the third Class A tranche will provide per-occurrence protection in Florida only. Auto and renter policy flood losses are included under the aggregate tranche coverage, while only renter policy flood losses are included under the Florida occurrence tranche.

This new cat bond also comes with multiple versions of key risk metrics, given the adoption of a new model version covering severe convective storm (SCS) risk. We previously reported that USAA is managing that model change within some of its earlier outstanding cat bonds.

A still targeted $150 million Class 14 tranche of aggregate notes have an initial base expected loss of 6.1% under the new model version and 0.98% under the older risk model version.

These notes were initially offered to cat bond investors with price guidance of 5.75% to 6.5%, but have now been revised to a single figure of 6.5%, so the top-end of guidance.

What was a $150 million tranche of aggregate Class 15 notes are now targeted to be between $150 million and $175 million in size, we understand.

The Class 15 notes have an initial base expected loss of 2.71% under the new model version and 0.59% under the older risk model version.

These notes were originally offered to investors with price guidance of 4.75% to 5.5%, which has now been lowered to a tighter spread of 4.5% to 4.75%, we are told.

The final Class A tranche of notes are the Florida focused per-occurrence tranche.

These notes were initially $300 million in size but are now targeted at $500 million in issuance size. These Class A notes have an initial attachment initial base expected loss of 2.51% under the new model version, or 2.52% under the older risk model version.

These notes were originally offered to investors with price guidance of 7% to 7.75%, but sources have now told us that price guidance has been reduced to between 6% and 7%.

It appears that this Residential Re 2026-1 issuance is now likely to become USAA’s largest catastrophe bond ever, which is particularly encouraging to see given that USAA is such a long-standing and prolific cat bond sponsor.

As a reminder, you can read all about this new Residential Reinsurance 2026 Limited (Series 2026-1) catastrophe bond from USAA and view details on almost every other cat bond ever issued in our extensive Artemis Deal Directory.