Florida Citizens sets $975m initial target for Everglades Re II 2025-1 cat bond
Citizens Property Insurance Corporation is back with a significant initial target to secure at least $975 million in named storm reinsurance protection from a new Everglades Re II Ltd. (Series 2025-1) catastrophe bond, as Florida’s property insurer of last resort looks to expand the capital markets participation in its reinsurance tower this year, Artemis can report.
Given the large initial size, at almost $1 billion, there is every chance this new Everglades catastrophe bond from Florida Citizens becomes one of the largest in the market’s history.
We believe this to be the largest initial size for a cat bond offering ever seen in the market. While a number have grown bigger than this during their marketing, we’ve never seen one come to market with an initial target size this big.
Recall that, Florida’s Citizens Property Insurance Corporation previously sponsored the largest catastrophe bond ever issued, the $1.5 billion Everglades Re Ltd. (Series 2014-1) issuance.
A year ago, Florida Citizens had been seeking to sponsor another very large deal, eventually settling for $1.1 billion of reinsurance from the Everglades Re II Ltd. (Series 2024-1) cat bond at a time when the market had just about exhausted its capacity due to a very busy pipeline of deals.
Only five catastrophe bonds have ever surpassed the billion dollar mark, but this Everglades Re II 2025-1 issuance could easily become the sixth, with its initial target size being $975 million and the cat bond market seeing strong deal execution in 2025 so far.
This will be the sixteenth series of cat bond notes sponsored by Florida Citizens and the fourteenth to take the Everglades Re name, since its first sponsorship of a catastrophe bond back in 2012.
Read about every one of Florida Citizens catastrophe bonds in our extensive Deal Directory.
Bermuda based special purpose insurer (SPI) Everglades Re II Ltd. is aiming to issue four tranches of Series 2025-1 notes, each to collateralize a three-year source of reinsurance for Florida Citizens.
All four tranches of notes being offered to catastrophe bond funds and investors will provide the Floridian property insurer of last resort with multi-year annual aggregate named storm reinsurance for the state of Florida, on an indemnity trigger basis, we understand.
The coverage will run from the date of issuance in May for a three year term, across three annual aggregate risk periods.
All four tranches are structured to sit on top of each other in the Florida Citizens reinsurance tower, each sharing layers with traditional reinsurance and also with the insurer’s industry-loss based Lightning Re catastrophe bond.
Recall that, Florida Citizens is looking to purchase $2.94 billion of new traditional reinsurance or catastrophe bonds for the 2025 hurricane season, alongside which it already has $1.6 billion of catastrophe bonds outstanding to provide protection for any 2025 storms.
As a result, if investor appetite for this new cat bond proves sufficient, Florida Citizens could expand this new issuance significantly as each cat bond tranche would have room to grow, if it elected to.
Everglades Re II is offering a $275 million tranche of Series 2025-1 Class A notes that would attach their coverage at $9.6 billion of losses and exhaust it at $10.8 billion, giving them an initial attachment probability of 1.72%, an initial base expected loss of 1.56% and they are being offered to investors with spread price guidance in a range from 8.75% to 9.5%, we understand.
An also $275 million tranche of Series 2025-1 Class B notes would attach their coverage at $8.4 billion of losses and exhaust it at $9.6 billion (so the next layer down), giving them an initial attachment probability of 2.07%, an initial base expected loss of 1.90% and they are being offered to investors with spread price guidance in a range from 9.75% to 10.5%.
A further $275 million tranche of Series 2025-1 Class C notes sit beneath and would attach their coverage at $7.2 billion of losses and exhaust it at $8.4 billion (so the next layer down), giving them an initial attachment probability of 2.60%, an initial base expected loss of 2.32% and they are being offered to investors with spread price guidance in a range from 11% to 11.75%, sources said.
A final $150 million tranche of Series 2025-1 Class D notes will sit lowest down, attaching their coverage at $6.489 billion of losses and exhausting it at $7.2 billion, giving them an initial attachment probability of 3.02%, an initial base expected loss of 2.80% and they are being offered to investors with spread price guidance in a range from 12.5% to 13.5%.
The multiples-at-market on offer are lower than seen with the 2014 Everglades cat bond from Citizens, but it seems commensurate with the softening seen across the catastrophe bond market this year and so should generate investor support, we suspect.
With investors feeling that Florida exposed cat bonds may in some cases pay a better risk-adjusted spread than other regional covers, while the insurance market there is seen as much improved thanks to enacted legislative reforms, and the fact none of the major hurricanes of the last decade have caused Florida Citizens a loss that would attach any of these tranches of notes, investors are likely to prove supportive.
It will be interesting to see how large this new catastrophe bond for Florida Citizens can get. With a number of other large issues anticipated to come to market this quarter it may prove a sensible strategy to have got out into the market in front of some of these.
It’s worth also noting, that like other recent Citizens cat bonds, the insurer can make an early redemption should its exposure base shrink below a specified level during the terms of the deal, giving it optionality should its reinsurance needs decline.
You can read all about this new Everglades Re II Ltd. (Series 2025-1) catastrophe bond being sponsored by Florida’s Citizens Property Insurance Corporation and view details of more than 1,000 other cat bond issuances in the extensive Artemis Deal Directory.
