SageSure seeks $50m county-weighted wind cover Gateway Re 2024-4 cat bond
SageSure, the coastal property managing general underwriter, is back in the catastrophe bond market seeking county-weighted industry-loss trigger coverage for named storm and hurricane risks for a second time, with a currently $50 million Gateway Re Ltd. (Series 2024-4) issuance.
A year ago, SageSure secured a three-year source of county-weighted, PCS trigger, aggregate retrocessional protection via its captive reinsurance vehicle, through a $50 million Gateway Re Ltd. (Series 2023-3) issuance.
This year, the company is seeking to extend that coverage with another index-trigger deal, this time with named cedents being its captive reinsurance vehicle Anchor Re, the SureChoice Underwriters Reciprocal Exchange (SURE) and Elevate Reciprocal Exchange and a structure designed to protect the companies in the event more than one major hurricane impacts their portfolios.
As a result, it’s a hurricane focused risk transfer hedge designed to take out some of the peak aggregated risks that SageSure’s underwriting entities hold.
As a reminder, there is another deal from SageSure entities in the market right now, a $100 million named storm reinsurance focused Gateway Re Ltd. (Series 2024-3) cat bond issuance, for SURE and Elevate.
Impressively, this new 2024-4 catastrophe bond is now the ninth in the Gateway Re series of deals since May 2022, demonstrating SageSure’s appetite to leverage the capital markets as a source of efficient risk capital as its underwriting businesses and partnerships continue to expand.
Gateway Re Ltd. will issue a $50 million or greater tranche of Series 2024-4 Class A notes to provide a source of collateralized retrocessional reinsurance to Anchor Re, SURE and Elevate.
Anchor Re operates as a reinsurance captive to SageSure’s carriers, so effectively the coverage will span much of the MGU’s book it seems, but this year’s deal explicitly names the two reciprocals as cedents as well.
The cat bond will provide SageSure’s reciprocal carriers and Anchor Re, with a source of US named storm retrocessional reinsurance protection across just the coming hurricane season, with the risk period over at the end of 2024, we are told.
That’s different to last year’s deal, which was a three-year county weighted cat bond for SageSure.
Once again though, the retro reinsurance protection from this Gateway Re 2024-4 cat bond is structured on an industry-loss index and annual aggregate basis, with the industry loss index county-weighted and so just the second time PCS county-level catastrophe loss reporting has been utilised in a cat bond trigger, as far as we can tell.
The index will be based on reported personal, commercial and auto lines losses and the there will be a franchise deductible of $5m per-event and a loss cap for single events that is the same as the attachment level.
That loss cap means a major hurricane can only contribute index points up to the attachment level, meaning a second event would be required for principal losses to occur.
The US named storm protection will cover county-weighted industry loss events in the states of Alabama, North and South Carolina, Louisiana, Mississippi, Texas, Virgina, and New York, the same set of states as last year’s deal.
The $50 million of Series 2024-4 Class A notes that Gateway Re Ltd. is seeking to issue will come with an initial attachment probability of 5.65%, an initial base expected loss of 2.22% and this year the notes are zero-coupon in nature and offered with price guidance in a range from 84% to 85% of par, so a rough 15% to 16% spread equivalent.
The three-year deal from last year that was also county-weighted paid investors a spread of 10% for a very similar risk level, it’s worth noting.
It’s good to see SageSure continuing to build out its catastrophe bond coverage across its underwriting entities and partners.
The way the company has embraced the cat bond market has been impressive to see, as it shows a sophisticated approach to reinsurance buying and a clear understanding of the efficiencies capital markets structures can bring to its reinsurance arrangements.
You can read all about this new Gateway Re Ltd. (Series 2024-4) catastrophe bond and every other cat bond deal in the Artemis Deal Directory.
