Cabrillo’s US Coastal insurers sponsoring $310m Chartwell Re catastrophe bond
The two US Coastal named insurance companies administered by Cabrillo Coastal General Insurance Agency, are sponsoring their first 144A catastrophe bond, with a currently $310 million Chartwell Re Ltd. (Series 2025-1) issuance seeking named storm reinsurance coverage across their main states of operation, Artemis has learned.
The sponsoring insurers are New York domiciled US Coastal Insurance Company and Florida domiciled US Coastal Property & Casualty Insurance Company.
Both are homeowners insurers and are administered by hurricane exposed property insurance specialist Cabrillo Coastal General Insurance Agency, part of Cabrillo Holdings, LLC, with Cabrillo’s owners the major stakeholders in the companies, while we understand RenaissanceRe Ventures also owns a stake.
Chartwell Re Ltd. has been established in Bermuda for the issuance of catastrophe bonds to benefit the insurers, as they look to expand their capital markets backed reinsurance protection.
US Coastal has previously been known as a buyer of collateralized reinsurance from insurance-linked securities (ILS) markets.
Back in 2018 we learned that US Coastal Insurance Company was the sponsor of a $53.3 million Eclipse Re 2018-01A private catastrophe bond and we were also told that US Coastal sponsored 2017’s also $53.3 million Eclipse Re 2017-02A transaction as well.
Since then, we haven’t learned of any other private cat bonds benefitting either of the insurers, but they are said to still be buyers of protection from private ILS funds, so there could be others.
This Chartwell Re Ltd. Series 2025-1 catastrophe bond is the first full Rule 144A issuance to be sponsored by the US Coastal insurers.
Chartwell Re Ltd. will offer three tranches of Series 2025-1 cat bond notes to investors, with a target to secure $310 million of fully-collateralized reinsurance for the US Coastal insurers, we understand from sources.
The Chartwell Re Series 2025-1 notes will provide the two US Coastal insurers sponsoring the deal with indemnity trigger, per-occurrence catastrophe reinsurance to protect the companies against named storm losses.
The covered area are the hurricane exposed states the two insurers underwrite business in, which are said to be: Alabama, Florida, Mississippi, New Jersey, New York, Rhode Island, and Texas.
It’s worth noting that our sources said certain counties in New York contribute the greatest shares of expected loss to the deal, while states like Florida are lower, which reflects the concentrations in that state US Coastal Insurance writes.
The Chartwell Re Series 2025-1 cat bond notes will provide the sponsors with three years of reinsurance, running from June 1st this year, we are told.
We understand that the three tranches of notes effectively sit on top of each other in the reinsurance tower, with FHCF coverage inuring to the lower layer of notes, which then inures to the one above, and so on. So while the attachment points appear the same, the effective attachments, in ultimate loss terms, are commensurately higher for each and stacked in tranche order, it seems.
Chartwell Re will issue a $150 million Series 2025-1 Class A tranche of notes that have an initial attachment point at $120 million and exhaust at $290 million, giving them an initial attachment probability of 1.95%, an initial expected loss of 1.46%, while they are being offered with price guidance in a range from 6.25% to 6.75%.
Next, a $100 million Series 2025-1 Class B tranche of notes have an initial attachment point at the same $120 million and exhaust at $220 million, giving them an initial attachment probability of 3.01%, an initial expected loss of 2.36%, while they are being offered with price guidance in a range from 7.5% to 8.25%.
Finally, a $60 million Series 2025-1 Class C tranche of notes have an initial attachment point at the same $120 million and exhaust at $180 million, giving them an initial attachment probability of 4.28%, an initial expected loss of 3.6%, while they are being offered with price guidance in a range from 9.75% to 10.75%.
As the catastrophe bond market continues to accelerate into the second-quarter, it’s encouraging to see another new sponsor come to market with its first Rule 144A issuance.
Notably, this also is the first catastrophe bond issuance we’ve ever analysed that features BMS Capital Advisory working in a service provider role.
In this case, the investment banking and capital markets arm of broker BMS Re is a joint-structuring agent and bookrunner, alongside Swiss Re Capital Markets.
It’s good to see another new broker/banker entering the cat bond market, broadening the range of experienced service providers for sponsors.
As a reminder, you can read all about this new Chartwell Re Ltd. (Series 2025-1) catastrophe bond and every other cat bond deal in the Artemis Deal Directory.
