Florida Citizens secures the biggest catastrophe bond ever, $1.525bn Everglades Re II

Florida’s Citizens Property Insurance Corporation has now successfully priced what is the biggest catastrophe bond issuance ever seen, securing a 56% upsized $1.525 billion of reinsurance from its new Everglades Re II Ltd. (Series 2025-1) issuance, Artemis has learned.

Once settled next week this new Everglades Re II Series 2025-1 catastrophe bond issuance for Florida Citizens will become only the sixth to ever achieve a greater than billion dollar offering size.

At $1.525 billion it narrowly surpasses Florida Citizens $1.5 billion Everglades Re Ltd. (Series 2014-1) issuance, which was the previous largest cat bond we’d ever analysed and tracked in our Deal Directory until now.

Florida Citizens came back to the catastrophe bond market earlier this month, initially seeking $975 million in named storm reinsurance protection.

As we reported in our first update on this new cat bond, Citizens target for the deal had increased with between $1.2 billion and $1.4 billion in named storm reinsurance limit sought, while at the same time pricing was updated and fell to the lower-end for some of the tranches.

In our second update on this cat bond, Florida Citizens target was lifted again, to between $1.4 billion and $1.525 billion of reinsurance from this new Everglades Re II 2025-1 deal.

Now we’ve learned that the upper-end of the adjusted size target has been achieved, with the Everglades Re II 2025-1 catastrophe bond set to provide it $1.525 billion of multi-year and fully-collateralized reinsurance, representing a 56% upsizing from the initial offering size.

Bermuda based special purpose insurer (SPI) Everglades Re II Ltd. will now 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 will be sold to catastrophe bond funds and investors, with the resulting collateral providing 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.

The Class A tranche of notes, which have an initial expected loss of 1.56%, were finalised to provide $450 million of reinsurance (up from the initial $275m target) and have priced to pay investors a spread of 8.75%, which is the low-end of initial guidance.

The Class B tranche of notes, which have an initial expected loss of 1.90%, have been finalised to provide Citizens $475 million  of reinsurance (up from the initial $275m target) and have priced to pay investors a spread of 9.75%, again the low-end of initial guidance.

The Class C tranche of notes, which have an initial expected loss of 2.32%, have been finalised to provide Citizens $375 million in reinsurance (up from the initial target of $275m) and priced to pay investors a spread of 11.25% which is in the lower-half of the initial guidance range.

The final Class D tranche of notes, which have an initial expected loss of 2.80%, have been finalised to provide $225 million in reinsurance (up from the initial target of $150m) and priced to pay investors a spread of 13%, which is at the mid-point of initial guidance.

As a result, all four tranches increased in size and also priced at the mid-point or below of spread guidance, indicating strong demand for this latest catastrophe bond from Florida Citizens.

It is a large deal, at $1.525 billion, for the catastrophe bond market to absorb, but with capital levels high and maturities still flowing and driving more cash holdings for cat bond funds, the market is readily able to accommodate larger issuances at this time.

Citizens already has $1.6 billion of catastrophe bonds outstanding to provide a portion of its reinsurance arrangements for the coming hurricane season.

With this new cat bond deal now having achieved the upper-target of $1.525 billion in offering size, it means Florida Citizens cat bond backed reinsurance protection will reach $3.125 billion for 2025, which is the highest level of protection the insurer has ever had from the cat bond market at one time.

Read about every one of Florida Citizens catastrophe bonds in our extensive Deal Directory.

As we reported last week, with Florida Citizens looking to secure $4.49 billion of private market risk transfer and reinsurance for 2025, this means that 70% of the total will now come from the catastrophe bond market to protect the insurer over the next year.

This is another landmark deal for the catastrophe bond market and for Citizens it significantly bolsters its risk transfer tower, growing the insurer’s efficient capital markets backed reinsurance protection.

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.