Insurer USAA revealed today that it has received more than 3,500 claims related to the California wildfires, with 86% of claims receiving initial payments of more than $1 billion, with the company projecting that its members’ wildfire losses will reach roughly $1.8 billion.
It’s important to note that USAA is perhaps the most consistent of catastrophe bond sponsors, at least of any primary company within the cat bond market.We previously reported that the mark-to-market impact to catastrophe bonds from the Los Angeles, California wildfires had risen, as a number of cat bond names saw further mark-downs on pricing sheets last Friday, while some aggregate cat bonds saw negative movements that had not done so before.
This includes USAA’s Residential Reinsurance 2021 Limited (Series 2021-1) Class 11 and Class 12 notes, as well as its Residential Reinsurance 2022 Limited (Series 2022-1) cat bond’s Class 11 and Class 12 notes, which had all been marked down before, but on Friday, price fell off between 15% and 25% at the mid of bid and offer were seen in the latest pricing sheets, sources explained.
However, two more tranches of aggregate ResRe cat bond notes also saw price declines at the latest marking, adding to the mark-downs seen. With the $125 million Class 13 tranche of the Residential Reinsurance 2023 Limited (Series 2023-1) issuance dropping around 28% at the mid, and the $50 million Class 13 tranche of the Residential Reinsurance 2024 Limited (Series 2024-1) issuance dropping around 15%.
It’s important to note though, that there is an event deductible in place for most of USAA’s cat bonds, including its Residential Reinsurance 2023 Limited (Series 2023-1) cat bond, where both tranches of Series 2023-1 notes feature an indemnity trigger in which they provide annual aggregate coverage after an initial event deductible of $50 million is applied.
As a result, this means that not all of USAA’s loss estimate from the wildfires will aggregate.
Therefore, it is difficult to say how much of the $1.8 billion in estimated wildfire losses will erode the attachment, but it’s safe to assume that it will be a meaningful addition.
Randy Termeer, USAA Property and Casualty President, commented: “USAA is deeply committed to supporting our members during this challenging time. We understand the significant impact these wildfires have on our members and their families, and by moving quickly to put money in our members’ hands, they are empowered to take the first steps towards rebuilding their lives.
“Our team is working tirelessly to ensure that our members receive the assistance they need to recover and rebuild.”
