Florida Citizens new Everglades cat bond sized up to $200m as price rises

Florida’s Citizens Property Insurance Corporation’s target for its new catastrophe bond now stands at up to $200 million, while pricing for the Everglades Re II Ltd. (Series 2022-1) transaction has risen to above the initial guidance, Artemis has learned.

With Florida Citizens expanding rapidly, as policyholders return to the insurer of last resort, it is expected to buy anything up to $3.4 billion of new reinsurance and catastrophe bonds in advance of the 2022 US hurricane season.

But Citizens returned to the market in late April with this Everglades Re II cat bond transaction that had a relatively small $100 million indicative size at launch.

But, as we explained, this Everglades Re II catastrophe bond from Florida Citizens is only designed to secure reinsurance protection for its Personal Lines Account (PLA), leaving the way open to bring further cat bonds to cover more of its Coastal Account risks, should it need to.

Now, we’re told this PLA-focused catastrophe bond looks set to increase in size, with the target now being for at least $100 million and up to $200 million of reinsurance with the new issuance.

So, this now up to $200 million single tranche of Class A Series 2022-1 notes that special purpose insurer Everglades Re II Ltd. will issue will provide Florida Citizens with a multi-year source of annual aggregate and indemnity trigger based reinsurance protection against named storms or hurricanes impacting the state of Florida, to May 2025.

Being for the Personal Lines Account, the reinsurance will largely cover losses to personal residential, multi-peril homeowner policies with wind, that Florida Citizens has issued or assumed.

The Series 2022-1 Class A notes will have an attachment point of $4.563 billion of losses, covering a share right up until exhaustion at $6.02 billion, giving them an initial attachment probability of 1.07% and an initial expected loss of 0.83%.

The notes were first marketed to cat bond investors with price guidance in a range from 6.5% to 7.25%, but we’re now told this has been raised to 7.75%, so above the top-end of initial coupon guidance.

Like so many other catastrophe bonds in the market, prices are rising and spreads widening, meaning Citizens will pay more than originally forecast for its new issuance.

But the insurer clearly sees the value in maintaining the capital markets participation in its reinsurance tower and this will mark an expansion of cat bond coverage within Citizens Personal Lines Account.

You can read all about Florida Citizens latest catastrophe bond, the Everglades Re II Ltd. (Series 2022-1) transaction, as well as every other cat bond transaction in our extensive Artemis Deal Directory.