CEA’s target for new Sutter Re 2023-1 cat bond lifted to as much as $425m

The California Earthquake Authority (CEA) has increased the target size for its latest catastrophe bond , with now up to $425 million of earthquake reinsurance sought from the Sutter Re Ltd. (Series 2023-1) issuance.

The California Earthquake Authority (CEA) returned to the catastrophe bond market around the middle of May, seeking $300 million or more in fuly-collateralized earthquake reinsurance protection from this new deal.

This became the 18th cat bond that is directly sponsored by the CEA that we have listed in our Deal Directory.

This Sutter Re 2023-1 cat bond issuance looks to secure a multi-year source of annual aggregate California earthquake reinsurance protection for the sponsor.

There are two tranches of notes on offer, that will be sold to investors and the proceeds used to collateralize retrocession agreements with global reinsurer Hannover Re who will front the capital markets for the CEA in this transaction.

The two tranches of Series 2023-1 notes issued by Sutter Re were launched to provide the CEA with at least $300 million in annual aggregate California earthquake reinsurance on an indemnity trigger basis across a three-year and three annual risk period term.

We’re now told that across the two tranches, the target is expected to now be for between $375 million and as much as $425 million of reinsurance from this Sutter Re 2023-1 cat bond issuance.

The Class B tranche of notes had started off with a $175 million target, but we’re now told are pitched at between $200 million and $225 million in size.

The Class B notes come with an initial expected loss of 1.86% and were initially offered to cat bond investors with price guidance in a range from 6.75% to 7.25%, but we’re told that guidance has now been fixed at the low-end of 6.75%.

The Class E tranche of notes were at first a $125 million offering, but we understand these are now seeking from $175 million to $200 million of reinsurance for the CEA.

The Class E layer is riskier, having an initial expected loss of 3.28% and these notes were first offered with price guidance of between 9.75% and 10.5%, but we’re now told the spread has also been fixed at the low-end of 9.75%.

So it’s just the size of this issuance left to be finalised and the CEA has opted to maximise the issuance at the lowest level of the price guidance offered, it seems.

You can read all about this new Sutter Re Ltd. (Series 2023-1) catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory.