Louisiana Citizens targets $150m Bayou Re catastrophe bond

Louisiana Citizens Property Insurance Corporation, the non-profit residential and commercial property insurer for those who cannot access private market insurance in the state, is back in the catastrophe bond market, seeking $150 million of named storm reinsurance through a Bayou Re Ltd. (Series 2023-1) deal.

This is the ninth catastrophe bond sponsored by Louisiana Citizens we now have listed in our Deal Directory.

For 2023, Louisiana Citizens has a new Bermuda based issuance vehicle, Bayou Re Ltd., that will target issuance of two tranches of catastrophe bond notes.

The notes will target $150 million of collateralized named storm reinsurance for the sponsor, through the sale of the notes to investors, with the proceeds used to underpin the reinsurance protection.

This first Bayou Re 2023-1 cat bond will protect Louisiana Citizens against named storms in its home state over a three year period, on an indemnity and per-occurrence basis, we understand.

A Class A tranche of notes are currently sized at $100 million and would attach at $800 million of losses to Louisiana Citizens, exhausting at $1.05 billion of losses, we’re told.

The Class A notes will have an initial attachment probability of 2.5%, an initial expected loss of 2.14% and are being offered with spread price guidance in a range from 13.25% to 14.25%.

A Class B tranche of notes are sized at $50 million and would attach lower down at $500 million of losses to Louisiana Citizens, exhausting at $800 million of losses, sources said

The Class B notes are therefore riskier and will have an initial attachment probability of 3.91%, an initial expected loss of 3.09% and are being offered with spread price guidance in a range from 18.5% to 19.5%, we are told.

The multiples on offer are particularly high here, perhaps reflecting the fact Louisiana Citizens has made reinsurance recoveries under its cat bond program in recent years.

The high multiples could prove attractive to investors, as well as the fact these are covering named storm risks only, where as other recent Louisiana Citizens cat bonds had also covered severe thunderstorm risks.

You can read all about this new Bayou Re Ltd. (Series 2023-1) catastrophe bond and every other cat bond issued in the extensive Artemis Deal Directory.