SURE upsizes new Gateway Re 2023-1 cat bond by 78% to $355m

Coastal property insurance underwriter SURE appears to have been very well-received in the catastrophe bond market for its second issuance, upsizing its proposed $200 million Gateway Re Ltd. (Series 2023-1) transaction by roughly 78%, to secure $355 million of named storm reinsurance protection from the capital markets.

It’s a particularly successful visit to the catastrophe bond market that speaks to SURE’s reputation and also to the timing with which it has brought this deal to market, we believe.

With cat bond fund managers having raised some new capital around the end of the year and into early January, or so we’re told, SURE’s timing hit the market while it was relatively quiet still and this has seemingly helped it to secure impressive execution, with the Gateway Re 2023-1 cat bond pricing within guidance, while upsizing significantly.

SURE, which was launched 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, securing $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.

For 2023, SURE was aiming to expand the coverage size and area with its new cat bond, while also bringing its second reciprocal exchange in as a cedent as well.

As we reported on January 13th, Gateway Re Ltd., SURE’s Bermuda domiciled SPI, was aiming to issue as many as three tranches of Series 2023-1 notes, that would be sold to catastrophe bond funds and investors and the proceeds used to collateralize reinsurance agreements between the SPI and ceding company SURE.

The issuance was targeting $200 million of broader US named storm reinsurance coverage across Alabama, North and South Carolina, Louisiana, Mississippi, Texas (NC and SC being new additions for 2023).

In addition, the new Gateway Re 2023-1 cat bond will cover both SureChoice Underwriters Reciprocal Exchange (SURE) and Elevate Reciprocal Exchange, where the 2022 deal only covered the first until it reset and others cedents could be added.

Of the three tranches of notes that were initially offered to investors, the Class C, one-year term and zero-coupon structured, tranche of notes are not being issued, sources have told Artemis.

Meanwhile, the Class A and B tranches remain and the overall size of the new cat bond has increased significantly for SURE.

When the cat bond was first offered to investors, it featured a $150 million tranche of Gateway Re Series 2023-1 Class A notes.

We’re now told that this tranche of Class A notes has doubled in size to $300 million, a significant increase and perhaps a sign of the capital raised in the market in recent weeks, helping SURE to strong execution.

The now $300 million of Class A notes come with an initial attachment probability of 2.68%, an initial base expected loss of 1.62% and were first offered to investors with price guidance in a range from 12.25% to 13%, but have now been priced with a spread of 13%, so at the top-end of guidance.

Meanwhile, what was a proposed $50 million Class B tranche of notes, which are riskier, have upsized slightly to $55 million.

The Class B notes have an attachment probability of 4.35%, a base expected loss of 3.36% and were first offered with price guidance of 19% to 20%, but the spread has now been priced at the top-end as well, at 20%, we’re told.