1 week ago
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Progressive, the US insurance group, has now secured the upsized target of $345 million of reinsurance protection from its new Bonanza Re Ltd. (Series 2024-1) catastrophe bond issuance, while the notes were priced at the bottom of lowered guidance in the case of all three tranches, we understand.
Progressive ventured back to the catastrophe bond market in late November this year, seeking what will be the eighth catastrophe bond under the Bonanza Re name.
The insurer’s initial target was to secure a $225 million source of capital markets backed reinsurance protection, on both an aggregate and occurrence basis from this deal.
We were then told that Progressive had lifted the target size of this Bonanza Re 2024-1 cat bond issuance to $345 million, while at the same time the price guidance for the notes offered was reduced.
In a further update, we were told that the size target remained $345 million, but that for a second time the price guidance had fallen.
Now, sources have told us that the Bonanza Re 2024-1 catastrophe bond has been successfully priced at the low-ends of the reduced guidance, to finalise and secure Progressive the upsized target for $345 million of reinsurance protection.
As a result, this will now become the largest cat bond in the Bonanza Re series of deals, for Progressive and its property insurance underwriting entities.
As a result, Progressive will receive through this Bonanza Re 2024-1 cat bond, a source of one year aggregate reinsurance and three year occurrence coverage, totalling $345 million across coverage types and the perils of named storm, earthquake (fire-following only), severe thunderstorm, winter storm, wildfire in the United States.
The $70 million tranche of zero-coupon discount Class A notes will provide aggregate coverage across a single year through 2025, with two sections of coverage with a shared limit, one focused on multi-peril cover and the other named storm only.
The Class A tranche of notes have an initial expected loss of 4.09% and were first offered to cat bond investors with price guidance of 79% to 77% of par, a rough spread equivalent of 21% to 23%, which was then reduced to a range of 80% to 79% of par, an effective spread equivalent of 20% to 21%, but the notes were priced at 80% of par, so a spread equivalent of 20%.
The other two tranches of notes are set to provide Progressive with three calendar years of indemnity and per-occurrence multi-peril reinsurance protection to the end of 2027.
The $75 million Class B tranche of notes have an initial expected loss of 0.76%. They were at first offered with price guidance of between 4.5% and 5.25%, but that was lowered to a new range of 4% to 4.45%, which then fell further to between 3.75% and 4% and we’re now told have been priced at the low-end of 3.75%
The $200 million tranche of Class C notes have an initial expected loss of 1.82%. They were first offered with spread price guidance of between 6.5% and 7.25%, which then fell to a new range of between 6% and 6.5%, before being lowered further to between 5.5% and 6% and we’re now told these too have priced at the low-end of a 5.5% risk spread.
So Progressive has secured the largest cat bond in the history of these Bonanza Re deals, adding to its capital markets backed reinsurance protection at attractive pricing thanks to the elevated investor demand being seen at this time.
You can read all about this Bonanza Re Ltd. (Series 2024-1) catastrophe bond and every other cat bond ever issued in the Artemis Deal Directory.
English (US) ·