USAA returns with $225m target Residential Re 2026-2 multi-peril catastrophe bond

US military mutual insurer USAA has returned to the catastrophe bond market to sponsor what will be the 48th cat bond that we have analysed and tracked from the company, with an initial target for $225 million or more in reinsurance from this Residential Reinsurance 2026 Limited (Series 2026-2) issuance, Artemis has learned.

USAA has, in recent history, always tended to sponsor a new catastrophe bond to provide per-occurrence reinsurance coverage around November time, which this seems to be the latest iteration of.

It marks the re-opening of the catastrophe bond market to broadly syndicated 144A deals after the typical hurricane season lull.

USAA sponsored its largest ever cat bond back in April, an $825 million Residential Re 2026-1 deal, while roughly a year ago the insurer secured $400 million of multi-peril per-occurrence reinsurance from the Residential Re 2025-2 cat bond.

USAA remains the most consistent and long-standing catastrophe bond sponsor in the marketplace, having added to and diversified its sources of catastrophe reinsurance protection using the capital markets since the beginning of cat bonds back in 1997.

As we said, this Residential Re 2026-2 issuance will be the 48th cat bond from USAA we have analysed and tracked over the years.

You can read about every one of USAA’s 47 issuances under the Residential Re name, as well as one named Espada Re cat bond, in our extensive Deal Directory.

This new Residential Re Series 2026-2 catastrophe bond offering sees the military mutual insurer looking to secure $225 million or more in multi-year and multi-peril catastrophe reinsurance from the capital markets.

Using its Residential Reinsurance 2026 Limited special purpose vehicle, USAA is now bringing three tranches of Series 2026-2 occurrence catastrophe bond notes to investors, we’ve learned from our market sources.

All three tranches of Series 2026-2 cat bond notes will be sold to investors and the proceeds used to collateralize underlying reinsurance agreements between the issuing vehicle and sponsor USAA, as is normally seen.

The three tranches of notes will provide USAA with four years of indemnity per-occurrence based reinsurance protection against losses from the typical perils that feature across all of the insurers catastrophe bond deals in recent years, being U.S. tropical cyclones, earthquakes (plus fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact, other perils (all including auto & renter policy flood losses), we understand.

Each of the Residential Reinsurance 2026-2 cat bond tranches will provide USAA with four years of per-occurrence reinsurance protection on an indemnity trigger basis, running from December 1st 2026 through November 30th 2030.

A Series 2026-2 Class 2 tranche of notes is preliminarily sized at $50 million and would attach their coverage at $2.45 billion of losses to USAA, exhausting at $3.45 billion, which gives them an initial base attachment probability of 8.24%, an initial base expected loss of 6.04% and they are being offered to cat bond investors with price guidance of 8.5% to 9.25%, sources said.

An also $50 million Series 2026-2 Class 3 tranche of notes would see their coverage attach at $3.45 billion of losses to USAA, exhausting at $4.6 billion making them less risky as they sit on top of the Class 2 notes, which results in an initial base attachment probability of 4.4%, an initial base expected loss of 3.34% and they are being offered to cat bond investors with price guidance of 5% to 5.5%.

The third and final Class 5 tranche of Series 2026-2 notes are larger at $125 million in size and would attach their coverage at $5.6 billion of losses to USAA, exhausting at $6.5 billion, which makes them the least risky layer with an initial base attachment probability of 1.72%, an initial base expected loss of 1.43% and they are being offered to cat bond investors with price guidance of 2.5% to 3%, we understand.

The price multiples look relatively low, which is to be expected as the market moves into the busier issuance fourth-quarter after further reinsurance rate softening around the mid-year.

At their mid-points of price guidance, the Class 2 riskiest tranche would have a multiple of 1.47 times the expected loss, the Class 3 tranche would have a multiple of 1.57 times EL and the least risky Class 5 notes would have a multiple of 1.92 times EL.

These can be compared to last year’s occurrence cat bond from USAA in October, which had a tranche with an initial expected loss of 6.47% that priced with a spread of 10.25% and so a multiple of 1.58, while a tranche with an expected loss of 1.82% priced at a spread of 3.25% for a multiple of 1.79 times EL.

So the multiples are down commensurately with reinsurance price softening in property catastrophe risks it seems and where the final cat bonds prior to the lull were settling. Which is to be expected, but always at this time of year it is interesting to see how investors respond as this can send a bit of a signal for what to expect in price terms through the rest of the year.

With now 48 catastrophe bond transactions from USAA now detailed in our Deal Directory, the insurer and its now 47 deal strong Residential Re cat bond program is the most prolific sponsor and program in the market, a regular and consistent feature since the cat bond instrument was first seen in late 1996 when USAA’s first began marketing.

You can read all about this new Residential Reinsurance 2026 Limited (Series 2026-2) catastrophe bond from USAA and view details on almost every other cat bond ever issued in our extensive Artemis Deal Directory.