CEA secures new Sutter Re cat bond upsized 42% at $425m

The California Earthquake Authority (CEA) has now finalised its new Sutter Re Ltd. (Series 2023-1) catastrophe bond issuance, securing the upsized target of $425 million of reinsurance protection, representing a 42% increase from the initial launch size.

At the same time, we understand that the CEA has secured the spread pricing on its new catastrophe bond at the low-end of guidance for each of the two tranches of notes that are being sold to cat bond investors.

The California Earthquake Authority (CEA) returned to the catastrophe bond market around the middle of May, seeking a $300 million or larger source of fuly-collateralized earthquake reinsurance protection from the capital markets.

This is now the 18th cat bond that is directly sponsored by the CEA that we have listed in our Deal Directory.

Now priced and finalised, this Sutter Re 2023-1 catastrophe bond issuance has secured a $425 million multi-year source of annual aggregate California earthquake reinsurance protection for the sponsor, a 42% upsizing on the initial target.

The Class B tranche of notes began with a $175 million target, with that lifted to between $200 million and $225 million in size, as we reported. We’re now told they have priced at the upper-end of that size range, to provide $225 million in reinsurance protection..

The Class B notes have an initial expected loss of 1.86% and have been priced at the low-end of guidance, for a spread of 6.75%.

The Class E tranche of notes launched targeted as a $125 million offering, but the target grew to $175 million to $200 million, and we’re now told the upper-end of that was achieved, with $200 million in reinsurance secured from this layer.

The Class E layer are riskier notes, with an initial expected loss of 3.28% and these notes have now also been priced at the low-end of their guidance, for a spread of 9.75%.

It’s good to see the upsizing of this latest catastrophe bond for the CEA, as the Californian earthquake insurer continues to contemplate its future use of reinsurance and risk transfer at recent Board meetings.

We expect to hear more about the CEA’s reinsurance strategy going forwards in the coming weeks.

You can read all about this new Sutter Re Ltd. (Series 2023-1) catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory.