Mercury General Corporation, the California headquartered insurer, is aiming to upsize its debut 144A catastrophe bond market, raising the target to secure as much as $150 million in reinsurance from the Luca Re Ltd. (Series 2025-1) issuance to cover wildfire and fire-following earthquake losses in its home state, Artemis can report.
As we said at the time, Mercury had previously sponsored four private catastrophe bonds under the Randolph Re name, but this will be the first Rule 144A cat bond for the company.
One of those private cat bonds, the Randolph Re (Series 2024-1) deal, remains heavily discounted in the secondary market on the expectation of it facing a payout due to the January 2025 Los Angeles wildfire event.
But that hasn’t stopped Mercury looking to the catastrophe bond market as one way to help rebuild its reinsurance after the massive claims it made following those fires.
Now, we’ve learned that Mercury is targeting between the initial $100 million and as much as $150 million of reinsurance from these Luca Re 2025-1 cat bond notes.
While at the same time the price guidance has been narrowed towards the lower-half of the initial range that was offered to investors.
So, Luca Re Ltd. is now targeting issuance of as much as $150 million Series 2025-1 Class A notes, that will provide Mercury with a three-year source of collateralized reinsurance against wildfire and fire-following earthquake losses in the state of California, on an indemnity and per-occurrence basis.
The now between $100 million and $150 million of Series 2025-1 Class A notes that Luca Re is offering to investors come with an initial expected loss of 1.08%. The notes were initially offered with spread price guidance in a range from 7.25% to 7.75%, but we’re now told that has been narrowed to a revised range of 7.25% to 7.5%, so the lower-half.
So Mercury is targeting more California fire reinsurance, with pricing potentially at or below the mid-point of guidance, which would indicate strong execution for the debut 144A catastrophe bond sponsor.
Wildfire risks have been increasingly accepted in the catastrophe bond market in 2025, which is encouraging to see as the capital markets respond to the needs of re/insurers for capacity to protect against that peril.
Read all about this Luca Re Ltd. (Series 2025-1) catastrophe bond as it comes to market and you can read about this and every other cat bond deal in the Artemis Deal Directory.
