CEA returns to add $400m of quake cover with Ursa Re 2023-3 cat bond

The California Earthquake Authority (CEA) has returned to the catastrophe bond market again, seeking $400 million or more in collateralized earthquake reinsurance from the capital markets from an Ursa Re Ltd. (Series 2023-3) issuance.

It’s the fourth catastrophe bond issuance of 2023 from the California Earthquake Authority (CEA)  and shows the insurer of last resort continuing to place the insurance-linked securities (ILS) market at the heart of its reinsurance program arrangements.

With some $775 million of CEA sponsored cat bonds scheduled to mature at the end of November 2023, it’s good to see the insurer back to secure more protection and with a transaction that could upsize if it finds the pricing conducive to do so.

As we recently reported, the CEA’s reinsurance tower had reached almost $8.86 billion in size, with its catastrophe bonds making up around 24% of the total.

Already this year the CEA has secured $430 million of reinsurance through two Ursa Re cat bond issuances and another $425 million from a Sutter Re deal. Including this new Ursa Re 2023-3 cat bond, we now have 20 catastrophe bonds listed in our Deal Directory that have been directly sponsored by the California Earthquake Authority (CEA).

The CEA is using its Ursa Re Ltd. special purpose insurer (SPI) in Bermuda for its latest cat bond deal, seeking $400 million or more in reinsurance from the issuance of two tranches of Series 2023-3 notes, we understand from sources.

Where sometimes the insurer uses a global reinsurance firm to front the capital markets, with this Ursa Re 2023-2 ca bond the CEA is the direct ceding insurer in this case.

The notes will provide the CEA with a targeted $400 million or more in California earthquake reinsurance protection, on an indemnity and annual aggregate basis, across a three year term to the end of November 2026, we understand.

A $225 million Class AA tranche of notes will cover a share of losses above $8.893 billion for the CEA, giving them an initial attachment probability of 1.12%, an initial expected loss of 1.05% and this tranche is being offered to investors with price guidance in a range from 5% to 5.5%, we’re told.

A $175 million Class D tranche of notes will cover a share of losses above $3.894 billion for the CEA, so are a riskier layer, having an initial attachment probability of 2.83%, an initial expected loss of 2.68% and this tranche is being offered to investors with price guidance in a range from 8% to 8.75%, it’s said.

It’s good to see the CEA continuing to place the catastrophe bond market at the core of its reinsurance arrangements and it will be interesting to see how this deal settles, in size and price terms, as there is ample room for it to grow should the CEA find it attractive to do so.

You can read all about this new Ursa Re Ltd. (Series 2023-3) catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory.