Coastal property managing general underwriter SageSure has raised the target size for its new Gateway Re Ltd. (Series 2025-1) catastrophe bond issuance, with now between $470 million and as much as $555 million of first and second event US named storm reinsurance protection sought.
SageSure returned to the catastrophe bond market in January, with an initial target to secure $410 million of first and second event US named storm reinsurance protection for some of its underwriting entities from what will be the tenth in the Gateway Re series of cat bonds.It is now set to be the largest catastrophe bond yet in that series, as SageSure continues to build-out its capital markets backed reinsurance protection through the 144A marketplace.
As we explained, this is also the most complex of the Gateway Re cat bonds so far, in terms of the structure and coverage of the capital markets backed reinsurance being sought, with three tranches to provide per-occurrence excess-of-loss reinsurance protection, and two to provide excess-of-loss second and subsequent coverage for the named ceding entities.
The named ceding entities in this case are the SureChoice Underwriters Reciprocal Exchange and SafeChoice Insurance Company and all five classes of notes on offer will provide indemnity trigger based US named storm reinsurance protection, but with some differences between states and durations covered, as well as in terms of the first event per-occurrence, or second and subsequent event reinsurance, they will provide.
Full details of the coverage each tranche will provide can be found in the Gateway Re Ltd. (Series 2025-1) Deal Directory entry.
The Class AAA notes were $100 million in size initially, but are now up to $125 million in size, we are told. With their initial expected loss of 1.07%, they were first offered with price guidance in a range from 5% to 5.5%, but that has now fallen to 4.5% to 5%.
The Class AA notes were $80 million in size initially, but are now $120 million in size. With their initial expected loss of 1.79%, they were first offered with price guidance in a range from 92.25% to 93%, being zero-coupon, which is a rough spread equivalent of 7% to 7.75%, but this pricing has also fallen to 93% to 93.5%, so a rough spread equivalent of 6.5% to 7%, sources said.
What was an $80 million Class A tranche of notes remain at that size. With their initial expected loss of 3.17% they were first offered with price guidance in a range from 11.25% to 12%, but that has also fallen to between 10.75% and 11.25%.
The next two tranches of notes will provide the second and subsequent event named storm reinsurance and initially there was a target to secure $150 million of protection across these two classes of notes.
The Class C1 tranche are now sized at between $50 million and $80 million we understand, while with their initial expected loss of 1.31% and being zero-coupon, they were first offered with price guidance in a range from 91% to 91.75%, which is a rough spread equivalent of 8.25% to 9%. Now, the price has also fallen, to 91.75%, so an 8.25% equivalent spread and at the bottom of the initial range.
The Class C 2 notes are now sized at between $120 million and $150 million, while with their initial expected loss of 1.31% they were being offered with price guidance in a range from 9.25% to 10%, which has now narrowed to between 9.5% and 9.75%.
So, in general, there has been an upsizing trend across the classes of notes in most cases, while pricing has largely come down aside from the final tranche of second-event notes.
It’s good to see SageSure expanding its catastrophe bond protection in this way, making the capital markets an even more meaningful participant in the reinsurance towers of its underwriting entities.
You can read all about this new Gateway Re Ltd. (Series 2025-1) catastrophe bond and every other cat bond deal in the Artemis Deal Directory.
