Louisiana Citizens Property Insurance Corporation, a non-profit residential and commercial property insurer for those unable to access private market insurance in the state, is back in the catastrophe bond market with a $200 million initial target for collateralized named storm reinsurance from a Bayou Re Ltd. (Series 2025-1) issuance, we have learned.
This will become the eleventh catastrophe bond sponsored by Louisiana Citizens that we have analysed and listed in our Deal Directory.
A year ago, Louisiana Citizens secured its largest cat bond to-date, getting an upsized $275 million of collateralized named storm reinsurance from the Bayou Re 2024-1 issuance.
The insurers’ $175 million Catahoula II Re 2022-1 catastrophe bond coverage matures in June this year. So already Louisiana Citizens is aiming to more than replace that, given the $200 million starting size for this new Bayou Re 2025-1 deal.
This will be the third takedown of a catastrophe bond under the Bayou Re Ltd. special purpose insurer (SPI) in Bermuda, as Louisiana Citizens looks to further build-out its multi-year hurricane and named storm reinsurance protection with the support of global capital market investors.
Bayou Re Ltd. will offer and sell to investors a $200 million single Class A tranche of Series 2025-1 notes, with the proceeds used to collateralize a reinsurance agreement between the SPI issuer and Louisiana Citizens.
These Bayou Re 2025-1 cat bond notes will protect Louisiana Citizens with a source of reinsurance against named storm losses in the state, structured using an indemnity trigger and on a per-occurrence basis, across a three-year term, we are told.
The $200 million Class A tranche of notes will initially have an attachment point at $1.05 billion of losses to Louisiana Citizens, with an exhaustion point at $1.33 billion, leaving room for the issuance to upsize to as much as $280 million, it seems.
The Series 2025-1 Class A notes Bayou Re Ltd. is offering come with an initial attachment probability of 1.93%, an initial base expected loss of 1.69% and are being offered to cat bond funds and investors with spread price guidance in a range from 7.5% to 8%, sources explained.
In terms of recent historical storms, only hurricane Katrina would have triggered and also exhausted these notes, had they been in-force at the time, we are told. No other hurricanes in recent history would have resulted in LA Citizens losses reaching this cat bonds attachment level.
For comparison, the Class A notes from the Bayou Re 2024-1 issuance came with an initial expected loss of 1.14% and priced to pay investors a spread of 8.5%, so as you’d expect the multiple on offer in 2025 is considerably lower.
It’s good to see Louisiana Citizens continue to build-out catastrophe bonds within its reinsurance tower and clearly looking to grow the contribution they provide to its risk transfer arrangements.
You can read all about this new Bayou Re Ltd. (Series 2025-1) catastrophe bond and every other cat bond issued in the extensive Artemis Deal Directory.
