GeoVera secures debut Veraison Re catastrophe bond on-target at $150m

GeoVera Insurance Holdings, Ltd., the specialty earthquake-focused residential property insurance company, has now secured its debut Veraison Re Ltd. (Series 2023-1) catastrophe bond at the initial targeted size of $150 million, despite the pricing rising significantly for the higher risk tranche of notes issued.

Fast-growing catastrophe exposed property and quake focused primary writer GeoVera, entered the catastrophe bond market for the first time back in early November.

When this first Veraison Re Ltd. catastrophe bond was launched to the investor community, GeoVera was aiming to secure $150 million of fully-collateralized, per-occurrence and multi-year US earthquake reinsurance cover its first foray into the cat bond market.

The process took a little longer than anticipated, we understand, with the pricing date being pushed back and the target looking a little less certain.

As we explained earlier this week, GeoVera adjusted the target size slightly, to between $145 million and $150 million, while at the same time the price guidance was elevated and some changes to deal terms around extension spreads were also applied.

The extension spread changes brought this first cat bond from GeoVera into line with other recent cat bonds, to pay a higher amount when extension events occurred, we’re told. That is now becoming fairly standard in the market.

In the end though, GeoVera has secured its original target amount of reinsurance coverage from its debut catastrophe bond, we’re now told, as the notes were finally priced late on Dec 14th and investors subscribed for $75 million of each of the two tranches of notes being issued.

As a result, Veraison Re Ltd. will issue a $75 million tranche of Class A notes, that come with an initial expected loss of 0.65% and will pay a coupon of 6.5%, the top-end of the initial 6% to 6.5% guidance.

It will also issue a $75 million Class B tranche of notes, that come with an initial expected loss of 2.91% and will pay a coupon of 12%, which is some 19% above the mid-point of the initially marketed guidance range of 9.75% to 10.5%.

It’s encouraging to see that GeoVera has secured the reinsurance coverage it wanted from the capital markets through its debut catastrophe bond, despite the pricing rising.

It’s also encouraging that the insurer worked through feedback from investors, took it onboard and updated the extension spread terms, as that shows a very constructive approach to GeoVera’s first cat bond market venture.

You can read all about this Veraison Re Ltd. (Series 2023-1) in the extensive Artemis Deal Directory that includes details on almost every cat bond ever issued.