CEA prices new cat bond, secures upsized $230m of quake reinsurance

The California Earthquake Authority (CEA) has now secured its new Ursa Re Ltd. (Series 2023-2) earthquake catastrophe bond at the upper-end of the targeted size, securing itself $230 million in collateralized earthquake reinsurance from the issuance, while the notes priced towards the lower-end of guidance.

The California Earthquake Authority (CEA), which is one of the most consistent sponsors of catastrophe bonds as a component of its significant reinsurance tower needs, returned to the market in late September with this new Ursa Re 2023-2 cat bond.

When it was launched to investors, the CEA was seeking $150 million of collateralized California earthquake reinsurance from its latest cat bond.

As we later reported, the CEA’s target was lifted for the transaction, with from $200 million and $230 million of reinsurance sought.

Now, we can reveal that the top-end of that range has been achieved, with the Ursa Re 2023-2 catastrophe bond set to provide the CEA with $230 million of quake reinsurance, our sources have said, representing a roughly 53% upsizing of the new cat bond.

As a result, this Ursa Re 2023-2 catastrophe bond will provide the CEA with a $230 million source of California earthquake reinsurance protection, on an indemnity and annual aggregate basis, across a just over three-year period, to the end of November 2026, incorporating three aggregate loss occurrence periods.

The $230 million of Class E notes that are being sold can attach when the CEA’s aggregated qualifying losses reach $3.024 billion or above during a loss occurrence period, covering a share of the losses it experiences across a $500 million layer of its reinsurance tower.

When they were first launched to investors, the Ursa Re 2023-2 cat bond notes which have an initial expected loss of 3.28% were offered to cat bond investors with price guidance in a range from 9% to 9.75%.

That spread guidance was later fixed at 9.25%, so within the lower-half of the range and that is where the notes have now been priced and finalised.

Which means that cat bond investors have accepted to be paid for this risk at rate that is a 2.82 multiple of the initial expected loss.

We can compare that to the Class E notes from the last Sutter Re cat bond from the CEA, as these also had an initial expected loss of 3.28%, but priced with a spread of 9.75%, so indicating that they paid investors a multiple-at-market of 2.97 times the expected loss.

Meaning that the pricing has come in a little keener for the CEA with its latest catastrophe bond, indicating a slight softening in the market, which we’d expect to see by now, but it is not a particularly significant price move since that Sutter deal was issued in June.

We now have details on 19 catastrophe bonds in our Deal Directory that have been directly sponsored by the California Earthquake Authority (CEA).

You can read all about this new Ursa Re Ltd. (Series 2023-2) catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory.