Louisiana Citizens Property Insurance Corporation, the non-profit residential and commercial property insurer for those who cannot access private market insurance in the state, has returned to the catastrophe bond market for its second issuance located in Singapore, with a currently $100 million Catahoula II Re Pte. Ltd. (Series 2022-1) transaction.
Last year, in 2021, Louisiana Citizens returned to use a Bermuda domiciled special purpose insurer for a $125 million Pelican IV Re Ltd. (Series 2021-1), after having switched to Singapore for a $60 million Catahoula Re Pte. Ltd. cat bond deal in 2020.
Previously, Louisiana Citizens had sponsored five cat bonds named Pelican Re, between 2012 and 2018, after which it changed the name of its issuing vehicle to Catahoula Re, named after an American dog breed that became the state dog of Louisiana.
Then the return to Bermuda for a Pelican Re cat bond deal a year ago and now the insurer is back in Singapore, with a new Catahoula II Re Pte. Ltd. vehicle established and expected to be licensed as a special purpose reinsurance vehicle there for the issuance of new catastrophe bonds.
For 2022, Louisiana Citizens is seeking $100 million or more of collateralized reinsurance against losses from named storms and severe thunderstorms affecting the State of Louisiana.
The coverage from the cat bond will be on a per-occurrence and indemnity trigger basis, running across a three-year term, but we understand one tranche of notes inures to reinsurance layers sitting beneath.
Catahoula II Re Pte. Ltd. will issue a currently $50 million tranche of Series 2022-1 Class A notes that would attach at $300 million of losses and exhaust at $525 million, but inure to reinsurance beneath so actually, on an event basis, attach at $525 million and run to $700 million it seems.
The Class A notes have an initial attachment probability of 1.41%, an initial expected loss of 1.12% and are being offered to cat bond investors with price guidance in a range from 8.5% to 9%.
The Series 2022-1 Class B tranche of notes are also sized at $50 million right now and attach at $300 million, covering a portion of losses to exhaustion at $525 million, but sit directly beneath the Class A notes.
The Class B notes are therefore riskier, with an attachment probability of 2.75%, an expected loss of 1.98% and price guidance in a range from 10% to 10.5%, we’re told.
As a reminder, Louisiana Citizens is expecting to make recoveries under two of its in-force catastrophe bonds after hurricane Ida, exhausting the reinsurance coverage from the $60 million Catahoula Re Pte. Ltd. (Series 2020-1) and the $75 million Pelican IV Re Ltd. (Series 2021-1) – Class A tranche of notes.
As a result, the insurer may be keen to upsize on this new Catahoula II Re cat bond issuance, in order to increase the capital markets share of its reinsurance tower for 2022.