Core Specialty Insurance Holdings, Inc. has increased the target size for its new Yosemite Re Ltd. (Series 2025-1) catastrophe bond, with now up to $95 million of catastrophe reinsurance sought from the deal which, like its first, will cover its StarStone US entities to begin.
Core Specialty returned to the cat bond market in February, initially targeting $75 million of US peak peril reinsurance protection from what is the second catastrophe bond sponsorship by the company.Like the first $65 million Yosemite Re 2022-1 cat bond, this seems to be a cat bond designed to protect a book of excess and surplus (E&S) focused insurance and will cover StarStone US entities StarStone National Insurance and StarStone Specialty Insurance at first.
Now, we’re told that the size target for this Yosemite Re 2025-1 cat bond has been updated, with between the initial $75 million and $95 million of protection now sought by Core Specialty for its StarStone US entities.
At the same time, we’re told the price guidance has been updated and fixed at the upper-end of initial guidance.
Yosemite Re Ltd., the Bermuda based special purpose insurer (SPI), is issuing the notes which will provide the StarStone companies (initially) with a multi-year source of collateralized indemnity and per-occurrence based catastrophe reinsurance protection against losses from named storms and earthquakes across the United States over a three year term to the end of May 2028.
The now targeted as up to $95 million tranche of Class A Series 2025-1 notes come with an initial expected loss of 1.80% and were initially offered to cat bond investors with spread price guidance in a range from 6.5% to 7.25%.
We understand that the price guidance has been updated and fixed at the top-end of that range, for a spread of 7.25% to be paid to cat bond investors.
At that price level, the multiple-at-market of expected loss for these Yosemite Re 2025-1 cat bond notes would be approximately 4.03 times EL.
The soon to mature 2022 issuance, which this seems a renewal of sorts for, had an initial expected loss of 1.16% and priced to pay investors a spread of 9.75%, so paid a multiple of roughly 8.4 times the EL.
So the pricing has declined considerably with this new deal. Although, it’s worth noting that the higher the EL, the lower the multiple is the typical trend seen with comparable issues from the same sponsors.
It’s also worth noting that the first Yosemite Re deal was at the time very rare cat bond covering excess and surplus line property risks. While that remains a relatively rare exposure base to underpin a cat bond, it is something the investor base has now become more familiar with, so there may also have been some novelty premium paid for the first deal in the series.
However, Core Specialty will certainly be pleased with the execution being seen and if the upsize to $95 million is also achieved this will show expanding appetite in the cat bond market to support its StarStone US entities with reinsurance, which can only be a positive signal.
Read all about this Yosemite Re Ltd. (Series 2025-1) catastrophe bond and every other cat bond deal issued in our extensive Artemis Deal Directory.
