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The California Earthquake Authority (CEA) has returned to the catastrophe bond market to sponsor its first issuance since late 2023, seeking $200 million or more in multi-year collateralized California earthquake reinsurance protection from the capital markets through this Ursa Re Ltd. (Series 2025-1) issuance.
The CEA last sponsored a catastrophe bond in December 2023 and in that year alone the earthquake insurer had secured over $1.5 billion of cat bond backed reinsurance from the capital markets.
But, since then with the CEA’s exposure base having declined, so has its need for reinsurance, which resulted in a shrinking of its risk transfer tower, as we’ve reported.
So it’s encouraging to see them back and this will be the 21st catastrophe bond sponsored by the California Earthquake Authority (CEA) that we have listed in our Deal Directory.
The CEA still has $2.055 billion of cat bond backed reinsurance in-force at this time, our catastrophe bond sponsor leaderboard shows, after a $215 million Ursa Re II 2021-1 Class F notes issuance matured at the end of November.
Of that, $245 million of the CEA’s Ursa Re in-force cat bonds mature in June 2025 and a further $505 million in December.
The CEA is using its Ursa Re Ltd. special purpose insurer (SPI) in Bermuda for this new cat bond deal, seeking $200 million or more in earthquake reinsurance from the issuance of a single Series 2025-1 tranche of notes, we understand from sources.
The CEA is again directly facing Ursa Re for this new cat bond, something which started with its late 2023 deal, having previously partnered with a global reinsurance firm it used to front the capital markets for it.
The Ursa Re Series 2025-1 cat bond notes will provide the CEA with a three-year source of California earthquake reinsurance protection, on an indemnity trigger and annual aggregate basis, we understand.
A currently $200 million tranche of Class F notes are being issued and will provide coverage across a $500 million layer of the CEA’s risk transfer tower, while having a $2.1 billion retention in place for the first loss occurrence period, we are told.
The Class F notes will come with an initial attachment probability of 4.38%, an initial expected loss of 4.05% and they are being offered to investors with price guidance in a range from 6.75% to 7.5%, sources explained.
As said, it’s good to see the CEA back in the market after a little time away. While the insurer’s exposure base is still fluctuating, it clearly recognises the benefits of multi-year and fully-collateralized reinsurance that its catastrophe bonds provide.
As we also reported this week, the CEA is discussing whether a second or subsequent event funding tower is required, to help is sustain operations after a major earthquake event, which could also incorporate more reinsurance and cat bonds.
You can read all about this new Ursa Re Ltd. (Series 2025-1) catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory.
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