The California Earthquake Authority (CEA) has returned to the catastrophe bond market to sponsor its first issuance since late 2023, looking for $200 million or more in multi-year collateralized California earthquake reinsurance protection from the capital markets through this Ursa Re Ltd. (Series 2025-1) issuance.
The CEA last sponsored a catastrophe bond in December 2023 and in that 12 months alone the earthquake insurer had secured over $1.5 billion of cat bond backed reinsurance from the capital markets.
But, since then with the CEA’s exposure base having declined, so has its need for reinsurance, which resulted in a shrinking of its risk transfer tower, as we’ve reported.
So it’s encouraging to see them back and this will likely be the twenty first catastrophe bond sponsored by the California Earthquake Authority (CEA) that now we have listed in our Deal Directory.
The CEA still has $2.055 billion of cat bond backed reinsurance in-force right now, our catastrophe bond sponsor leaderboard shows, after a $215 million Ursa Re II 2021-1 Class F notes issuance matured at the top of November.
Of that, $245 million of the CEA’s Ursa Re in-force cat bonds mature in June 2025 and an extra $505 million in December.
The CEA is using its Ursa Re Ltd. special purpose insurer (SPI) in Bermuda for this recent cat bond deal, looking for $200 million or more in earthquake reinsurance from the issuance of a single Series 2025-1 tranche of notes, we understand from sources.
The CEA is again directly facing Ursa Re for this recent cat bond, something which began with its late 2023 deal, having previously partnered with a world reinsurance firm it used to front the capital markets for it.
The Ursa Re Series 2025-1 cat bond notes will provide the CEA with a three-year source of California earthquake reinsurance protection, on an indemnity trigger and annual aggregate basis, we understand.
A currently $200 million tranche of Class F notes are being issued and can provide coverage across a $500 million layer of the CEA’s risk transfer tower, while having a $2.1 billion retention in place for the primary loss occurrence period, we’re told.
The Class F notes will include an initial attachment probability of 4.38%, an initial expected lack of 4.05% and so they are being offered to investors with price guidance in a spread from 6.75% to 7.5%, sources explained.
As said, it’s good to see the CEA back available in the market after just a little time away. While the insurer’s exposure base continues to be fluctuating, it clearly recognises the advantages of multi-year and fully-collateralized reinsurance that its catastrophe bonds provide.
As we also reported this week, the CEA is discussing whether a second or subsequent event funding tower is required, to assistance is sustain operations after a significant earthquake event, which could also incorporate more reinsurance and cat bonds.
You may read all about this recent Ursa Re Ltd. (Series 2025-1) catastrophe bond from the California Earthquake Authority (CEA) and each other cat bond ever issued within the extensive Artemis Deal Directory.