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US insurance firm Progressive is back in the catastrophe bond market and seeking $225 million or more in protection against losses from multiple perils, with a Bonanza Re Ltd. (Series 2024-1) issuance that will provide it with both aggregate and occurrence property catastrophe reinsurance, Artemis understands.
This is the eighth catastrophe bond under the Bonanza Re name since the first came to market back in 2016.
Over the years, the cedent beneficiaries have changed, given acquisitions, but we now understand this new Bonanza Re 2024-1 catastrophe bond is designed to provide reinsurance across Progressive’s home insurance and commercial portfolio of companies.
This latest Bonanza Re deal will feature three tranches of notes, one with two sections to provide aggregate coverage coverage on both a multi-peril and US wind only basis, the other two providing multi-peril per-occurrence reinsurance.
Bermuda domiciled special purpose insurer Bonanza Re Ltd. will issue the three tranches of Series 2024-1 cat bond notes, with the proceeds from their sale used to collateralize multi-year reinsurance arrangements for the Progressive insurance companies, sources explained.
Across the three tranches, Progressive is looking to secure $225 million or more in indemnity triggered, multi-peril and multi-year US focused reinsurance from the capital markets.
The Bonanza Re 2024-1 cat bond will provide the insurer with one year of aggregate reinsurance and three years of occurrence coverage, across the perils of named storm, earthquake (fire-following only), severe thunderstorm, winter storm, wildfire in the United States.
A $50 million tranche of zero-coupon discount Class A notes are designed to provide aggregate coverage across just a single year through 2025, and have two sections with a shared limit, one focused on multi-peril cover and the other named storm only, we are told.
The aggregate multi-peril cover of the Class A notes would attach at $525 million in losses and exhaust at $625 million with an event deductible of $20 million and maximum contribution of $180 million, while the named storm only section would attach at $425 million and exhaust at $525 million with an event deductible of $25 million and maximum event contribution of $175 million, we understand.
The $50 million Class A notes come with an initial attachment probability of 6.03%, an initial expected loss of 4.09% and are being offered to cat bond investors with price guidance of 79% to 77% of par, which is a rough spread equivalent of 21% to 23%, it appears.
The other two tranches are simpler in structure, providing three calendar years of indemnity and per-occurrence multi-peril reinsurance protection to the end of 2027 for Progressive.
A $75 million tranche of Class B notes have an attachment point of $1.05 billion of losses and exhaust coverage at $1.38 billion, giving them an initial attachment probability of 0.93%, an initial expected loss of 0.76% and they come with spread price guidance of between 4.5% and 5.25%.
The final $100 million tranche of Class C notes would also attach at $1.05 billion of losses but then exhaust coverage at a lower $1.25 billion, giving them an initial attachment probability of 2.09%, an initial expected loss of 1.82% and they come with spread price guidance of between 6.5% and 7.25%.
We’re told inuring reinsurance makes the difference and that the effective attachment for the B notes is much higher, at around $1.72 billion of losses, which explains the lower attachment probability and EL metrics for this layer.
We are also told that Progressive has ample room to upsize these occurrence tranches, should it choose to and if the catastrophe bond market proves competitive on price for reinsurance we could see this deal increasing in size.
It’s encouraging to see Progressive looking to sponsor one of the largest Bonanza Re cat bonds issued and with this eighth in the series having the potential to upsize and become the largest catastrophe bond we’ve seen to-date for the insurance company.
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) ·