The North Carolina Insurance Underwriting Association (NCIUA) just missed the revised upper-end target for its new Cape Lookout Re Ltd. (Series 2022-1) catastrophe bond issuance, with the deal eventually pricing to offer the insurance pool $330 million of reinsurance protection.
At launch, the NCIUA was seeking $300 million or more in collateralized reinsurance protection from the Cape Lookout Re 2022-1 catastrophe bond deal.
It is the fourth of the Cape Lookout Re series of cat bonds for the North Carolina Insurance Underwriting Association (NCIUA), which is the coastal property insurance underwriting pool for the state of North Carolina.
Ambitions rose and the NCIUA then lifted its target to as much as $350 million of cover from the new cat bond, but this upper-end target wasn’t reached, as we’re now told by sources the new Cape Lookout Re 2022-1 cat bond will close at $330 million in size.
We reported at the start of March that Cape Lookout Re Ltd., the Bermuda special purpose insurer used by NCIUA for its catastrophe bonds, was aiming to issue a single, preliminarily sized $300 million tranche of Series 2022-1 Class A notes.
Having raised that target to between $325 million and $350 million, we’re now told the NCIUA has settled for $330 million of reinsurance from this new cat bond.
So, this transaction will provide the NCIUA with a $330 million three year source of collateralized reinsurance against losses from named storms and severe thunderstorms that impact the state of North Carolina, using an indemnity trigger and on an annual aggregate basis.
The $330 million of Series 2022-1 Class A notes that Cape Lookout Re Ltd. will issue, have an initial attachment probability of 1.97% and an initial expected loss of 1.54%.
At first, the notes were offered to cat bond investors with price guidance in a range from 4.5% to 5%, but the coupon was then fixed at the upper-end of guidance, with the notes set to pay investors a 5% coupon.
The NCIUA’s $450 million Cape Lookout Re Ltd. (Series 2019-1) cat bond matured in February this year, meaning that this new $330 million Series 2022-1 issuance only partially replaces some of that reinsurance coverage for the sponsor.