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 lifted the target for its latest catastrophe bond, now seeking up to $200 million of reinsurance from the Catahoula II Re Pte. Ltd. (Series 2022-1) transaction.
When this Catahoula II Re catastrophe bond was launched to investors a few weeks ago, the target size was set at just $100 million for Louisiana Citizens.
We’re now told the target has been raised considerably, with between $150 million and $200 million of reinsurance protection now sought.
At the same time, price guidance for the two tranches of cat bond notes on offer have been raised significantly, with both tranches set to be priced well above their initial coupon spread guidance.
So, for 2022, Louisiana Citizens is now seeking between $150 million and $200 million of fully-collateralized reinsurance protection for losses from named storms and severe thunderstorms affecting the State of Louisiana.
The cat bond will provide per-occurrence and indemnity trigger based reinsurance protection, running across a three-year term, with one tranche of notes inuring to reinsurance tower layers sitting beneath.
What was a $50 million tranche of Series 2022-1 Class A notes is now offered as between $100 million and $125 million in size, we’re told.
The Class A notes have an initial expected loss of 1.12% and were first offered to cat bond investors with price guidance in a range from 8.5% to 9%, but we’re now told that the coupon price has been fixed at 9.5%, so above the initial range.
The Series 2022-1 Class B tranche of notes also began as $50 million in size, but are now targeted at between that amount and $75 million.
The Class B notes are riskier, with an initial expected loss of 1.98% and their initial price guidance was in a range from 10% to 10.5%, but we now understand this has been raised considerably to a coupon of 13%.
To recap for you, 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.
Because of these expected reinsurance recoveries, we suggested that the insurer might upsize this new Catahoula II Re cat bond issuance, in order to increase the capital markets share of its reinsurance tower for 2022, which it now appears Louisiana Citizens will attempt to do.