Louisiana Citizens gets Catahoula Re cat bond at $175m in size

Louisiana Citizens Property Insurance Corporation, the non-profit residential and commercial property insurer for those who cannot access private market insurance in the state, eventually secured its latest Catahoula II Re Pte. Ltd. (Series 2022-1) catastrophe bond to provide it $175 million of capital markets backed reinsurance.

The insurer launched its efforts to secure a Catahoula II Re catastrophe bond a few weeks back, when the target size was set at just $100 million.

As we explained in an update last week, the target size was raised considerably, with between $150 million and $200 million of reinsurance protection then being sought.

We’re now told that the size of this latest Louisiana Citizens catastrophe bond issuance will be $175 million, while pricing for both tranches of notes remained at the raised levels explained in our last update.

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.

So to secure this new cat bond at an upsized level, even with higher than initially targeted pricing, is a good result for the state’s insurer of last resort.

This Catahoula II Re Series 2022-1 catastrophe bond will provide Louisiana Citizens with a source of 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 was then offered as between $100 million and $125 million in size, and we’re now told the tranche will settle at $120 million, so almost at the top-end.

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%, and we’re now told the coupon price remained at the raised 9.5%.

The Series 2022-1 Class B tranche of notes also began at $50 million in size, then being targeted at between that amount and $75 million and we’re now told they have settled at $55 million in size.

The Class B notes are the riskier layer, with an initial expected loss of 1.98% and their initial price guidance was in a range from 10% to 10.5%, which was subsequently raised considerably to a coupon of 13% and has now been finalised at that level.

With this cat bond, Louisiana Citizens has more than replaced the coverage it called on through reinsurance recoveries on its older cat bonds, so the insurer has increased the participation of the capital markets in its reinsurance program, which is encouraging to see.

You can read all about this new Catahoula II Re Pte. Ltd. (Series 2022-1) catastrophe bond from Louisiana Citizens and every other cat bond transaction issued in our extensive Artemis Deal Directory.