Cabrillo’s US Coastal targets upsized $330m Chartwell Re cat bond, as pricing falls
New York domiciled US Coastal Insurance Company and Florida domiciled US Coastal Property & Casualty Insurance Company, have an upsized target for their first 144A catastrophe bond, increasing it to now seek $330 million of named storm reinsurance coverage from the Chartwell Re Ltd. (Series 2025-1) issuance, Artemis has learned.
At the same time, we have also been told that the price guidance for this Chartwell Re 2025-1 cat bond has fallen across the board, with all three tranches now featuring updated, lower guidance ranges and could now price at the bottom-end or below.
Both companies 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.
As we previously reported, 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.
Both of the US Coastal named insurance companies ventured into the catastrophe bond market for the first time in April, initially seeking $310 million in named storm reinsurance coverage.
The three tranches of Chartwell Re Series 2025-1 notes are set to 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.
As we’ve previously reported, 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 also provide the sponsors with three years of reinsurance, running from June 1st this year.
At this latest update, the Class A tranche of notes that are being offered by Chartwell Re have grown from $150 million to now a $170 million target size. These have an initial attachment point at $120 million and exhaust at $290 million, giving them an initial attachment probability of 1.95%, and an initial expected loss of 1.46%.
The notes were originally being offered with price guidance in a range from 6.25% to 6.75%, but sources have now informed us that price guidance has dropped, with a new tighter range of 5.75% to 6.25%.
The still $100 million Series 2025-1 Class B tranche of notes that are being offered, have an initial attachment point at the same $120 million and exhaust at $220 million, giving them an initial attachment probability of 3.01%, and an initial expected loss of 2.36%.
The notes were originally being offered to cat bond investors with price guidance in a range from 7.5% to 8.25%, but now we’re told that price guidance has fallen, with the notes being offered with an updated range of 7.00% to 7.50%.
And finally, the still $60 million Series 2025-1 Class C tranche of notes that are being offered by Chartwell Re also have an initial attachment point at the same $120 million and exhaust at $180 million, giving them an initial attachment probability of 4.28%, and an initial expected loss of 3.6%.
The notes were originally being offered with price guidance in a range from 9.75% to 10.75%, but we’re now told that price guidance has fallen, with the notes now being offered with an updated range of 9.25% to 9.75%.
As a result, it looks like US Coastal Insurance Company and Florida domiciled US Coastal Property & Casualty Insurance Company, could secure their first catastrophe bond coverage upsized and priced at the bottom of guidance or below, once again reflecting elevated investor demand for new issues and the recent strong execution of deals being seen in the marketplace.
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.
