USAA looks to upsize ResRe 2024-2 cat bond to $450m at lower pricing

We’ve learned that insurer USAA is aiming to upsize its latest catastrophe bond to provide $450 million of occurrence reinsurance protection, up from the initial $325 million target, while at the same time the price guidance for notes from this new Residential Reinsurance 2024 Limited (Series 2024-2) deal has tumbled.

Underscoring very attractive issuance conditions in the catastrophe bond market, USAA is the latest that looks set to secure its new cat bond coverage with pricing at the low-end of initial guidance, or below it.

It reflects a well-capitalised and cash rich cat bond investor community at this time, which is helping to drive strong execution for sponsors.

Having returned to the market with a new Residential Re 2024-2 catastrophe bond issuance recently, with an initial $325 million target for the deal, we’ve now learned that the target size has been increased to $450 million.

This new Residential Re cat bond will be the 44th we have tracked from USAA, with now 43 issuances under the Residential Re name and one named Espada Re all listed in our extensive Deal Directory.

Three tranches of notes are being issued by the Residential Reinsurance 2024 Limited structure located in the Cayman Islands, to provide USAA with multi-peril, per-occurrence and indemnity triggered reinsurance protection against losses from US peak and other perils across a four year term.

A Class 2 tranche of notes was preliminarily sized at $50 million, but is now pitched to be $75 million in size, we are told. The Class 2 notes come with an initial expected loss of 6.14% and were first offered with price guidance of 14% to 15%, but we’re now told the updated guidance range is lower at 13.25% to 14%.

The second, Class 3 tranche of notes were preliminarily sized at $125 million, but are now aiming for $200 million, we understand. These Class 3 notes will have an initial expected loss of 3.25% and were first offered with price guidance in a range from 7.75% to 8.5%, but that too has been lowered to an updated range of 7% to 7.75%

The third and final Class 4 tranche of notes targeted $150 million to begin, but are now aimed to secure $175 million of reinsurance for USAA. These Class 4 notes have an initial expected loss of 2.05% and were initially offered with price guidance of 6% to 6.5%, which has also tumbled to a new and updated price range of 5.25% to 6% being offered to investors, we understand.

It looks like this new Residential Re cat bond issuance for USAA could be an example of very strong execution for the sponsor, reflecting strong cat bond fund and investor appetites, excess cash in the market needing to be deployed and the fact the cat bond market has come through recent hurricanes relatively unscathed.

Interestingly, at $450 million in size once settled this new Residential Re 2024-2 deal would become the equal third-largest cat bond issuance ever sponsored by USAA.

You can read all about this new Residential Reinsurance 2024 Limited (Series 2024-2) catastrophe bond from USAA and view details on almost every other cat bond ever issued in our extensive Artemis Deal Directory.