The California Earthquake Authority (CEA) is back in the catastrophe bond market looking for more earthquake reinsurance protection from the capital markets, with an initial $250 million target for what will be its 22nd directly sponsored cat bond, an Ursa Re II Ltd. (Series 2025-1) issuance.
Now, the CEA has returned using its other special purpose insurer (SPI), Ursa Re II Ltd., with an initial target to add a further $250 million of California earthquake reinsurance protection from the insurance-linked securities (ILS) market with this new deal.
This is the first time the Ursa Re II structure has been used by the CEA since late 2022.
It’s good to see the CEA persisting with bringing capital source diversification to its reinsurance tower, and this will be the 22nd catastrophe bond directly sponsored by the California Earthquake Authority (CEA) that we have listed in our Deal Directory.
Ursa Re II Ltd. is targeting issuance of a single Class G tranche of Series 2025-1 catastrophe bond notes, we have learned.
These notes will be sold to cat bond investors and the proceeds used to collateralize a reinsurance agreement between the issuing vehicle and the CEA.
The Ursa Re II Series 2025-1 cat bond notes will provide the CEA with a three-year source of fully-collateralized California earthquake reinsurance protection, on an indemnity trigger and annual aggregate basis, which is typical of most of the Authority’s cat bond deals.
Sources said the currently $250 million tranche of Class G notes will provide the CEA with reinsurance coverage across a $400 million layer of its risk transfer tower, while having a $1.7 billion retention in place for the first loss occurrence period.
The Class G notes will come with an initial attachment probability of 5.26%, an initial expected loss of 4.88% and they are being offered to investors with price guidance in a range from 8.5% to 9.25%, we understand.
At the mid-point of that guidance range, the spread multiple-at-market would be almost 1.82 times the expected loss.
For comparison, the Ursa Re 2025-1 cat bond notes issued earlier this year came with an initial expected loss of 4.05% and priced at 7.5%, so had a spread multiple of 1.85 times EL.
The CEA currently has $2.455 billion of cat bond backed reinsurance in-force, our catastrophe bond sponsor leaderboard shows.
With a $245 million Ursa Re II Series 2022-1 cat bond scheduled to mature in June, this new issuance from the same structure looks set to more than replace that already.
You can read all about this new Ursa Re II Ltd. (Series 2025-1) catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory.
