SURE targets expanded cover with $200m Gateway Re 2023-1 cat bond

Coastal property insurance underwriter SURE has returned to the catastrophe bond market for the second time, seeking to secure $200 million or more in expanded US named storm reinsurance from a new Gateway Re Ltd. (Series 2023-1) transaction.

SURE, which was formed by SageSure Capital Holdings Inc. and underwrites its business using the SureChoice Underwriters Reciprocal Exchange (SURE) and Elevate Reciprocal Exchange, first visited the cat bond market in 2022.

The company secured $150 million of collateralized reinsurance covering losses from US named storms in Alabama, Louisiana, Mississippi, Texas with a Gateway Re Ltd. (Series 2022-1) issuance.

Now, for 2023, SURE is looking to expand the coverage size and area, we’re told, while also bringing its second reciprocal exchange in as a cedent as well.

Gateway Re Ltd., the insurers’ Bermuda domiciled SPI, will seek to issue as many as three tranches of Series 2023-1 notes, that will be sold to catastrophe bond funds and investors and the proceeds used to collateralize reinsurance agreements between the SPI and ceding company SURE.

The coverage is across more states that SURE’s last cat bond deal, with the named storm protection extending across Alabama, North and South Carolina, Louisiana, Mississippi, Texas (NC and SC being new additions for 2023), we understand.

In addition, both the SureChoice Underwriters Reciprocal Exchange (SURE) and Elevate Reciprocal Exchange will be covered by this new cat bond, where as from launch the 2022 deal only covered the former.

We’re told that a Class A tranche of notes is preliminarily targeting $150 million of named storm reinsurance protection for SURE and these notes are the least risky layer being transferred to the capital markets.

The $150 million of Gateway Re Series 2023-1 Class A notes come with an initial attachment probability of 2.68%, an initial base expected loss of 1.62% and are being marketed to investors with price guidance in a range from 12.25% to 13%, we’re told.

A proposed $50 million Class B tranche of notes are riskier, having an attachment probability of 4.35%, a base expected loss of 3.36% and are offered with price guidance of 19% to 20%.

The Class A and B tranches are both multi-year, offering three years of cover to February 2026.

The final Class C tranche of notes have a one-year term, come with no preliminary size, are structured as zero-coupon notes and have the same attachment and expected loss as the B’s, but come with pricing of 81% to 82% of par (so an 18% to 19% rough coupon equivalent), sources told us.

So, as the C tranche doesn’t come with a size, it’s possible SURE is testing investor appetite with the one-year zero-coupon layer versus the three year Class B’s, meaning it’s uncertain both get issued.

It’s good to see SURE returning to the cat bond market and especially as it is seeking more reinsurance coverage, with a growing deal and a layered approach to maturities, having issued only a year ago.

You can read all about this new Gateway Re Ltd. (Series 2023-1) catastrophe bond and every other cat bond deal in the Artemis Deal Directory.