CEA now seeks up to $675m of reinsurance from Ursa Re 2023-3 cat bond

Artemis has learned that the California Earthquake Authority (CEA) has upsized its coverage ambitions for its latest Ursa Re Ltd. (Series 2023-3)  catastrophe bond, with the target size now lifted to between $575 million and as much as $675 million of reinsurance protection.

The CEA, one of the largest reinsurance buyers in the world, returned to the catastrophe bond market a fortnight ago, seeking what will be its fourth catastrophe bond issuance of 2023.

Before getting too excited about the potential size of the CEA’s new cat bond, it’s important to also note that there are some $775 million of CEA sponsored cat bonds scheduled to mature at the end of this month.

But still, this new Ursa Re 2023-3 cat bond was originally slated at just $400 million in size, so the upsized target shows the CEA is keen to replace as much of its expiring cat bond cover as it can, while also being aware of market constraints on capital at what is a very busy time.

With this Ursa Re Ltd. Series 2023-3 cat bond issuance, the CEA was originally targeting $400 million or more in California earthquake reinsurance protection, on an indemnity and annual aggregate basis, to run across a three year term to the end of November 2026.

Now, we’re told the target size is for an issuance of cat bond notes to secure between $575 million and as much as $675 million of collateralized reinsurance from the ILS market.

What was a $225 million Class AA tranche of notes are now sized at between $275 million and $325 million, we’re told.

The AA notes have an initial expected loss of 1.05% and were first offered to investors with price guidance in a range from 5% to 5.5%, but that guidance has now been fixed at the upper-end of 5.5% we understand.

What was a $175 million Class D tranche of notes are now sized at between $300 million and $350 million, sources said.

The D notes have an initial expected loss of 2.68% and were first offered to investors with price guidance in a range from 8% to 8.75%, but again we’re told the spread guidance is now fixed at the top-end of 8.75%.

With the spreads moving to the wide-end of guidance, it’s encouraging that the CEA still finds cat bond market pricing conducive to upsize its latest issuance, which also provides some indications for broader traditional reinsurance pricing as well, especially as the CEA is an extremely price-conscious and strategic buyer of reinsurance.

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.