We’ve learnt that insurer USAA is aiming to upsize its latest catastrophe bond to provide as much as $425 million of annual aggregate reinsurance protection, an increase from the initial $400 million target, for this new Residential Reinsurance 2025 Limited (Series 2025-1) deal.
USAA continues to be the most consistent of catastrophe bond sponsors, augmenting and diversifying its sources of catastrophe reinsurance protection using the capital markets, a strategy it has been following since 1997.
This new Residential Re 2025-1 cat bond is the 45th transaction we have tracked from USAA, with now 44 issuances under the Residential Re name, as well as one named Espada Re, all of which are listed in the extensive Artemis Deal Directory.
USAA made its return to the catastrophe bond market in early April, initially seeking $400 million of annual aggregate reinsurance protection from this Residential Re 2025-1 issuance.
Now, we have learnt that overall target size has been lifted, with now up to $425 million of reinsurance now sought across the three cat bond tranches being offered to investors.
At the same time, the price guidance has shifted towards the upper-end of the marketed range for one of the layers of notes on offer, while guidance has moved towards the mid-range point for the other two layers of notes on offer.
As we’ve previously reported, the three tranches of notes will provide USAA with roughly four years of annual aggregate and indemnity based reinsurance protection against losses from the usual perils that feature in its catastrophe bond deals, being U.S. tropical cyclones, earthquakes (plus fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact, other perils (all including auto & renter policy flood losses).
The Class 13 tranche of notes remain at $50 million in size for the issuance. They have an initial base expected loss of 2.25% and these notes were originally being offered with price guidance of 12% to 13%, but we are now told that they are being pitched towards the upper-end of that range, at 13%.
The Class 14 tranche of notes remain at $150 million in size. They have an initial base expected loss of 0.99%, and these notes were originally being offered to investors with spread price guidance in a range from 7.5% to 8%, but we have now been told that they are being pitched towards the mid-point of that range, at 7.75%.
The final $200 million Class 15 tranche of notes are now being targeted at between that level and $225 million, depending on demand. They have an initial base expected loss of 0.61% and these notes were being offered to cat bond investors with price guidance of 5.5% to 6%. That price guidance has now also shifted towards the mid-point of that range, at 5.75%.
We’ll update you when final size and pricing of this Residential Reinsurance 2025 Limited (Series 2025-1) issuance are known.
With a staggering 45 catastrophe bond transactions from USAA now listed in our Deal Directory, the insurer and its now 44 deal strong Residential Re cat bond program are the most prolific sponsor and program in the marketplace, a regular and consistent feature since the cat bond instrument was first developed.
You can read all about this new Residential Reinsurance 2025 Limited (Series 2025-1) catastrophe bond from USAA and view details on almost every other cat bond ever issued in our extensive Artemis Deal Directory.
