Security First to sponsor its fifth cat bond, a $100m First Coast Re IV

Security First Insurance Company, a specialist Florida domestic homeowners insurer, is back in the catastrophe bond market with a First Coast Re IV Ltd. (Series 2023-1) issuance, that targets $100 million or more in named storm and severe thunderstorm reinsurance protection for the company.

This will be the fifth catastrophe bond to be sponsored by Security First, it’s last being in 2021. You can read about each of the Security First cat bonds in our Deal Directory.

For its 2023 cat bond, the carrier has returned to Bermuda as a domicile for the issuance vehicle, it’s last two cat bonds having been issued out of Singapore.

First Coast Re IV Ltd. has been registered in Bermuda and will be licensed as a special purpose insurer (SPI) for issuing series of catastrophe bonds.

A single, currently $100 million, tranche of Series 2023-1 Class A notes will be issued by First Coast Re IV and sold to investors, with the proceeds used to collateralize the underlying reinsurance protection.

As with previous cat bonds from Security First, the company is working with global reinsurance firm Swiss Re, which will act as a ceding reinsurer and enter into a retrocession agreement with the issuer, First Coast Re IV Ltd.

In turn, Swiss Re will enter into a reinsurance agreement with Security First, to pass on the collateralized coverage, meaning the reinsurer therefore acts as a front to the capital markets for the Florida homeowners specialist.

The $100 million or more in notes issued by First Coast Re IV will provide Security First with a source of collateralized reinsurance protection against Florida named storms and severe thunderstorms, we understand.

We’re told the cat bond will feature an indemnity trigger and provide its coverage on a per-occurrence, but cascading basis.

That’s similar to Security First’s previous cat bond and ensures that the reinsurance will cascade down the tower if layers beneath are eroded, presumably meaning less chance of gaps being left in its protection.

The term of coverage will be three years, we understand, with maturity of the notes slated for April 2026.

The $100 million or more in Series 2023-1 Class A notes will come with an initial attachment probability of 1.36%, an initial base expected loss of 1.25% and are being offered to cat bond funds and investors with spread guidance in a range from 10% to 11%, sources said.

For comparison, Security First’s 2021 cat bond came with an expected loss of 1.86% and paid a spread of just 6% above the collateral return, so the multiple-at-market with this new First Coast Re IV cat bond is much higher, reflecting harder reinsurance market conditions.

You can read all about this new First Coast Re IV Ltd. (Series 2023-1) catastrophe bond, as well as details on over 900 other cat bond transactions in the extensive Artemis Deal Directory.