Lower Ferry Re cat bond priced to provide NJM $190m of reinsurance

The Lower Ferry Re Ltd. (Series 2023-1) catastrophe bond issuance has now been priced to provide sponsor NJM Insurance with $190 million of named storm reinsurance protection from the capital markets, some way short of its top size target for the deal.

The last time NJM (New Jersey Manufacturers) Insurance has been in the cat bond market for reinsurance cover was back in 2013, when it had sponsored a $60 million Sullivan Re Ltd. (Series 2013-1) transaction.

Returning in 2023, the Northeast US focused insurer set up a Bermuda domiciled Lower Ferry Re Ltd. vehicle to issue its second catastrophe bond.

Two tranches of notes were set to be issued, with an initial target to secure $175 million of protection from this first Lower Ferry Re cat bond, that would provide NJM Insurance and subsidiaries with three-year’s of US named storm reinsurance protection across the Northeast US, on an indemnity and per-occurrence basis.

But we were then informed that the target size for this first Lower Ferry Re cat bond was increased, with up to $225 million of reinsurance then being sought.

Now, we’re told the notes have been priced and the end result is that this cat bond will provide NJM Insurance with $190 million of US named storm reinsurance across northeastern states, so above the initial target, but some way off the revised upper-target amount.

Initially, the Class A tranche of notes were sized at $50 million, which was then increased at the first update to up to $75 million. We’re now told the Class A tranche of notes will be $65 million in size.

With their initial base expected loss of 0.88%, the Class A notes were first offered with price guidance indicating a spread of between 4.25% and 4.75%, which was subsequently narrowed to between 4.25% and 4.5%, and we’re now told have been priced at the low-end of guidance, for a spread of 4.25%.

The Class B tranche of notes are a little riskier and were first sized at $125 million, which was subsequently pitched at up to $150 million at the first update. We’re now told the Class B tranche will be $125 million in size, so the original target.

With an initial base expected loss of 1.36%, the Class B notes were first offered with price guidance indicating a spread of between 4.75% and 5.5%, which was subsequently fixed at 5% and that is where the notes priced, so within the lower-half of guidance.

It transpires that NJM Insurance was clearly focused on price as well as size and opted to secure the best pricing execution it could, foregoing a little of the size with its second catastrophe bond.

You read all about this new Lower Ferry Re Ltd. (Series 2023-1) cat bond transaction and every other catastrophe bond in the Artemis Deal Directory.