USAA secures 56% upsized $350m Residential Re 2026-2 cat bond priced below guidance

USAA has now priced and secured the 56% upsized target of $350 million of multi-year per-occurrence reinsurance coverage from its new Residential Reinsurance 2026 Limited (Series 2026-2) catastrophe bond issuance, getting the capital markets coverage at pricing levels below guidance, Artemis can report.

USAA returned to the catastrophe bond market earlier this month to sponsor its 48th cat bond that we have tracked from the company.

Initially, the target was to secure $225 million of multi-year per-occurrence reinsurance coverage, but in our first update, we learned that USAA had lifted the target size by 56% to $350 million, while the price guidance was also lowered for the three tranches of notes on offer.

We then reported in our update yesterday that the $350 million target remained, but USAA was still looking to capitalise on investor appetite, with the price guidance lowering once again for each of the tranches on offer.

Now, we can report that USAA successfully finalised its latest cat bond sponsorship to provide the 56% upsized $350 million of multi-year per-occurrence reinsurance protection, while the pricing was finalised at a below initial guidance level for all three tranches of notes.

We won’t repeat all the details of the cat bond in our updates on size and pricing, so make sure to visit the Artemis Deal Directory entry for more background details on the transaction.

Once settled, all three tranches of Residential Reinsurance 2026-2 cat bond notes will provide USAA with four years of multi-peril per-occurrence catastrophe reinsurance protection on an indemnity trigger basis, running from December 1st, 2026, through to November 30th, 2030.

The Class 2 tranche of notes will provide USAA with $100 million of reinsurance protection with an initial base expected loss of 6.04%. These notes were first offered to cat bond investors with price guidance of 8.5% to 9.25%, which was lowered to 7.75% and 8.5%, and then fell again to 7.25% to 7.75%, eventually pricing at the lowest end of 7.25%.

A further tranche of Series 2026-2 Class 3 notes will also provide USAA with $100 million of reinsurance protection. These notes have an initial base expected loss of 3.34% and were initially offered to investors with price guidance of 5% to 5.5%, which later reduced to 4.25% and 5%, and then fell to a tighter spread of 3.75% to 4.25%, eventually pricing at 4%.

The final $150 million Class 5 tranche of Series 2026-2 notes that Residential Reinsurance 2026 Limited will issue have an initial base expected loss of 1.43%. These notes were initially marketed with price guidance of 2.5% to 3%, which again, was lowered in our first update to 2% and 2.5%, and fell further to 1.75% to 2%. We’re now told by sources that the notes have been priced to pay investors an initial risk interest spread of 2%.

This is a great result for USAA. The insurer has managed to secure its latest catastrophe bond with more reinsurance than initially sought, while pricing well below the initially expected guidance ranges.

With a staggering 48 catastrophe bond transactions from USAA now detailed in our extensive Deal Directory, the insurer and its now 47 deal strong Residential Re cat bond program is the most prolific sponsor and program in the cat bond market.

You can read all about this new Residential Reinsurance 2026 Limited (Series 2026-2) catastrophe bond from USAA and every other cat bond transaction in the extensive Artemis Deal Directory.