Insurer USAA has returned for what will likely be the forty fourth catastrophe bond issuance we’ve got tracked from the corporate, initially targeting $325 million of occurrence reinsurance protection from a recent Residential Reinsurance 2024 Limited (Series 2024-2) deal, Artemis has learned.
USAA is essentially the most consistent of catastrophe bond sponsors, that appears to enhance and diversify its sources of catastrophe reinsurance protection using the capital markets and has been doing so since 1997.
This recent Residential Re cat bond is the forty fourth we’ve got tracked from USAA, with now 43 issuances under the Residential Re name and one named Espada Re all listed in our extensive Deal Directory.
Demonstrating its consistency, USAA has tended to sponsor two catastrophe bond issuances every year of late, one cat bond that gives aggregate reinsurance protection in May, and a cat bond to supply per-occurrence cover in November.
This issuance is the regular November deal from USAA, seeing the military mutual insurer trying to secure $325 million or more in multi-year and per-occurrence multi-peril catastrophe reinsurance from the capital markets.
Using its Residential Reinsurance 2024 Limited structure positioned within the Cayman Islands, USAA is bringing three tranches of Series 2024-2 catastrophe bond notes to market, we understand.
All three tranches of notes will provide USAA with per-occurrence and indemnity triggered reinsurance protection against losses from the perils of U.S. tropical cyclones, earthquakes (plus fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact, other perils (all including auto & renter policy flood losses), that are the everyday range of perils the insurer seeks cat bond cover for.
Each of the tranches will provide USAA with 4 years of protection, running from December 1st 2024 through November thirtieth 2028, we’re told.
The primary, Class 2 tranche of notes is preliminarily sized at $50 million and would attach at $2 billion of losses to USAA, exhausting at $2.9 billion, giving them an initial attachment probability of 8.21%, an initial expected lack of 6.14% and so they are offered with price guidance of 14% to fifteen%.
The second, Class 3 tranche of notes is preliminarily sized at $125 million and would attach at $2.9 billion of losses to USAA, exhausting at $4.15 billion, giving them an initial attachment probability of 4.52%, an initial expected lack of 3.25% and so they are offered with price guidance in a variety from 7.75% to eight.5%.
The third and final, Class 4 tranche of notes is preliminarily sized at $150 million and would attach at $4.15 billion of losses to USAA, exhausting at $4.85 billion, which supplies them an initial attachment probability of two.35%, an initial expected lack of 2.05% and so they are offered with price guidance of 6% to six.5%, sources said.
As such, these cat bond tranches from the ResRe 2024-2 issuance cover a comparatively small percentage of the reinsurance layer in each case, sitting atop each other to supply layered capital markets diversification to its reinsurance tower, and offering a variety of risk-return profiles for cat bond investors.
Comparing this recent 2024-2 issuance to last November’s Residential Reinsurance 2023-2 deal, that per-occurrence issuance featured one zero-coupon tranche with a 5.91% expected loss that priced at a rough coupon equivalent of 13.5%, one tranche with an initial EL of three.05% that priced at 8.5% and one tranche with an initial EL of 1.25% that priced at 5.75%.
With 43 transactions now listed in our Deal Directory from USAA’s Residential Re cat bond program, the insurer is essentially the most prolific sponsor within the marketplace and an everyday and consistent feature of the cat bond market because the asset class was first developed.
You may read all about this recent Residential Reinsurance 2024 Limited (Series 2024-2) catastrophe bond from USAA and examine details on almost every other cat bond ever issued in our extensive Artemis Deal Directory.