The first catastrophe bond to be sponsored by coastal property insurance underwriter SURE, or the SureChoice Underwriters Reciprocal Exchange, has now been priced and the company secured its initial target for $150 million of reinsurance from the Gateway Re Ltd. (Series 2022-1) transaction, but the coupon moved to the upper-end of guidance.
SURE entered the catastrophe bond market for the first time in early April, seeking $150 million or more of US wind focused catastrophe reinsurance protection from the capital markets.
SureChoice Underwriters Reciprocal Exchange (SURE) is a relatively new coastal property insurer in the United States, that distributes its policies through a partnership with SageSure Insurance Managers.
The cat bond has now been priced, but becomes the latest to see its coupon move up during its marketing to investors.
Bermuda domiciled special purpose insurer (SPI) Gateway Re Ltd. will issue a single $150 million tranche of Series 2022-1 Class A notes to provide SURE with a three-year source of US named storm and hurricane reinsurance protection, initially focused only on the Gulf Coast states of Alabama, Louisiana, Mississippi, Texas.
The Gateway Re cat bond will provide the SureChoice Underwriters Reciprocal Exchange with named storm reinsurance protection on an indemnity trigger and per-occurrence basis across three full Atlantic hurricane seasons, with maturity slated for May 2025.
The $150 million of Series 2022-1 Class A notes being issued by Gateway Re Ltd. have an initial attachment probability of 2.73%, an initial expected loss of 1.68%.
At first they were offered to cat bond investors with coupon price guidance in a range from 7.75% to 8.5%, but we’re now told that has been fixed when the deal priced Friday, to pay investors an 8.5% coupon.
Originally the closing for this cat bond had been targeted for the last week of April, but now we’re told that has moved out a little to May 6th.
While the cat bond market is currently experiencing a bit of a mismatch between investor appetite for risk and sponsor pricing ambitions, as well as between pipeline capacity need and actual available market capital, it’s encouraging to see deals like this for new sponsors getting done, still within the original guidance.