NCIUA targets $300m Cape Lookout Re 2022-1 catastrophe bond

NCIUA targets $300m Cape Lookout Re 2022-1 catastrophe bond

The North Carolina Insurance Underwriting Association (NCIUA) has actually returned to the catastrophe bond market for its very first issuance of 2022, looking for $300 million or more in collateralized reinsurance protection from a Cape Lookout Re Ltd. (Series 2022-1) issuance.This is the 4th in the Cape Lookout Re series of disaster bonds for the North Carolina Insurance Underwriting Association (NCIUA), which is a coastal property insurance underwriting pool for the state of North Carolina.
The NCIUA has been a regular visitor to the capital markets for catastrophe reinsurance for over a years, considering that its first feline bond Parkton Re Ltd. in 2009, which it had actually sponsored alongside the states Joint Underwriting Association.
In 2019, the NCIUA sponsored two disaster bonds, a $450 million Cape Lookout Re Ltd. (Series 2019-1) cat bond that sat greater up in its reinsurance tower and after that a $100 million Cape Lookout Re Ltd. (Series 2019-2) cat bond that sat lower down and so was riskier.
The NCIUA then sponsored another $250 million Cape Lookout Re Ltd. (Series 2021-1) feline bond last year.
The $450 million Cape Lookout Re 2019-1 feline bond matured in February this year, so with this new Series 2022-1 issuance it appears the NCIUA is wanting to change some of that protection.
Cape Lookout Re Ltd., the Bermuda special purpose insurance company, will provide a single, preliminarily sized $300 million tranche of Series 2022-1 Class A notes, sources informed Artemis.
These notes will be offered to feline bond investors and the earnings used to collateralize a retrocessional reinsurance agreement between Cape Lookout Re Ltd. and fronting reinsurer Hannover Re, which will in turn get in into a reinsurance arrangement with the NCIUA to pass on the protection.
The feline bond will eventually offer the NCIUA with a 3 year source of collateralized reinsurance against losses from called storms and extreme thunderstorms that impact the state of North Carolina.
The protection will be structured utilizing an indemnity trigger and be paid for on a yearly aggregate basis.
This new Cape Lookout Re 2022-1 catastrophe bond will see its reinsurance coverage connect at $1.85 billion of losses and exhaust at $2.55 billion of losses, so covering a portion of a broad $700 million layer of the NCIUAs reinsurance program, providing sufficient space for this issuance to upsize, if market conditions contribute.
As an outcome, the presently $300 million of Series 2022-1 Class A notes will feature an initial accessory likelihood of 1.97%, a preliminary predicted loss of 1.54% and they are being used to cat bond investors with rate assistance in a range from 4.5% to 5%, were told.
Thats a fairly similar level of danger to the recently grown 2019-1 cat bond from Cape Lookout Re, so this new issuance ought to fill gaps in the NCIUA reinsurance tower that its maturity created.
The prices likewise looks a little higher than the 2019 cat bond, which should please financiers and cat mutual fund managers.
For contrast, the Cape Lookout Re 2019-1 cat bond had a preliminary expected loss of 1.61% and priced at 4.25%, so used investors a multiple-at-market of 2.64 times the EL.
This new 2022-1 cat bond, with its expected loss of 1.54% and coupon at the mid-point of 4.75% might offer a base multiple of around 3 times, reflecting the truth the feline bond market is a little firmer now than in 2019, however still providing well-priced coverage.
Well keep you upgraded as this latest catastrophe bond concerns market and you can check out everything about the Cape Lookout Re Ltd. (Series 2022-1) transaction and every other cat bond in our Artemis Deal Directory.

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