The California Earthquake Authority (CEA) has now priced its latest catastrophe bond issuance, successfully doubling the Ursa Re Ltd. (Series 2025-1) offering in size to provide it with $400 million in multi-year collateralized California earthquake reinsurance protection.
The CEA recently returned to the catastrophe bond market with an initial target to secure $200 million or more in multi-year collateralized California earthquake reinsurance protection.As we reported in our first update on this new deal, the target issuance size was increased to between $325 million and $375 million, while at the same time, the price guidance was fixed at 7.5%.
Later, sources told us that a second increase to the target size for this new catastrophe bond had occurred, with a 100% upsized $400 million of multi-year collateralized California earthquake reinsurance protection being sought by the CEA.
Now, we’ve learned that the CEA has successfully priced its new catastrophe bond to provide that 100% upsized target for $400 million of reinsurance, while the notes were priced at the 7.5% spread level, which is the upper-end of the initial guidance range.
With this new cat bond deal, the CEA has secured a three-year source of California earthquake reinsurance protection from the capital markets on an indemnity trigger and annual aggregate basis.
What was initially a $200 million tranche of Series 2025-1 Class F notes, were first increased to between $325 million and $375 million in size, but then increased further to $400 million, which is now confirmed to be the issuance size after pricing has occurred.
The Class F tranche of notes will provide coverage across a $500 million layer of the CEA’s risk transfer tower, while having a $2.1 billion retention in place for the first loss occurrence period.
The Class F notes will come with an initial attachment probability of 4.38% and an initial expected loss of 4.05%.
The notes were first offered to investors with price guidance in a range from 6.75% to 7.5%, but since then the price guidance was fixed at 7.5%, so the top of the initial range, which is where they eventually priced.
The CEA has made the most of this opportunity to bulk up on reinsurance from the capital markets with its latest cat bond deal, capitalising on the strong demand being seen from the catastrophe bond investor base for new issues.
This will become the 21st successful catastrophe bond issuance sponsored by the California Earthquake Authority (CEA) that we have listed in our Deal Directory.
After this new cat bond settles, the CEA will have $2.455 billion of cat bond backed reinsurance in-force, our catastrophe bond sponsor leaderboard shows.
As a reminder, you can read all about this Ursa Re Ltd. (Series 2025-1) in the extensive Artemis Deal Directory that includes details on almost every cat bond ever issued.
