USAA secures $450m of reinsurance with upsized Residential Re 2024-2 cat bond

Insurer USAA has now secured the upsized target of $450 million of multi-peril catastrophe reinsurance from its new Residential Reinsurance 2024 Limited (Series 2024-2) catastrophe bond, while the three tranches of notes have all been priced at the bottom-end of their reduced guidance ranges, Artemis can report.

USAA came back to the catastrophe bond market with what is the 44th issuance we have tracked from the sponsor last month, with an initial $325 million of reinsurance target for this deal.

As we reported last week, the target size of the Residential Re 2024-2 cat bond issuance was increased to $450 million, while at the same time the price guidance was updated, with new ranges below those that the notes were initially offered at.

Now, sources have told us that USAA has been successful on both fronts, securing the upsized $450 million in fully-collateralized reinsurance from the cat bond market, while the pricing has fallen to the bottom of the reduced ranges.

Once again, this underscores the currently very attractive issuance conditions in the catastrophe bond market for sponsors, reflecting a well-capitalised and cash rich cat bond investor community at this time, which is helping to drive strong execution.

This new Residential Re cat bond will be the 44th we have tracked from USAA, with now 43 issuances under the Residential Re name and one named Espada Re all listed in our extensive Deal Directory.

Now priced to provide $450 million in cover across three tranches of Series 2024-2 notes that are being issued by the Residential Reinsurance 2024 Limited structure located in the Cayman Islands, this latest cat bond will provide USAA with multi-peril, per-occurrence and indemnity triggered reinsurance protection against losses from US peak and other perils across a four year term.

A Class 2 tranche of notes was preliminarily sized at $50 million, but has been upsized to provide $75 million in cover. The Class 2 notes come with an initial expected loss of 6.14% and were first offered with price guidance of 14% to 15%, which was then lowered to a range of 13.25% to 14%. This tranche of notes have now priced at 13.25%, the bottom of reduced guidance.

The second, Class 3 tranche of notes were preliminarily sized at $125 million, but have been finalised to provide USAA $200 million of cover. These Class 3 notes will have an initial expected loss of 3.25% and were first offered with price guidance in a range from 7.75% to 8.5%, but that too was lowered to a range of 7% to 7.75%. This tranche of notes have now been priced with a spread of 7%, again the bottom of reduced guidance.

The third and final Class 4 tranche of notes targeted $150 million to begin, but have now secured USAA $175 million of reinsurance, we are told. These Class 4 notes have an initial expected loss of 2.05% and were initially offered with price guidance of 6% to 6.5%, but that was also lowered to between 5.25% to 6%. We’re now told this tranche priced with a spread of 5.25%, once again the low-end of reduced guidance.

As we said in our previous article, at $450 million this new Residential Re 2024-2 deal will become the equal third-largest cat bond issuance ever sponsored by USAA.

The cat bond market continues to demonstrate its appetite for risk from long-standing sponsors like USAA, supporting their need for catastrophe reinsurance protection at competitive pricing.

You can read all about this new Residential Reinsurance 2024 Limited (Series 2024-2) catastrophe bond from USAA and view details on almost every other cat bond ever issued in our extensive Artemis Deal Directory.