Heritage Insurance Holdings, Inc., the Florida-headquartered but nationwide property and casualty insurer, has returned to the catastrophe bond market seeking $100 million or more in wind reinsurance in the northeastern United States with a Citrus Re Ltd. transaction. (series 2022-1).
Heritage has been visiting the catastrophe bond market since 2014, when it first sponsored a Citrus Re cat bond.
The company has benefited from a number of reinsurance clawbacks under its Cat Citrus Re bond program, but its last issuance was in May 2017, just before the hurricane season that drove much of the recovery. performed by Heritage.
It is therefore good to see the insurer return to the cat bond market after a hiatus of almost five years and even more encouraging to learn that Heritage is seeking to cover the risks of its insurance portfolio acquired in Narrangasett Bay.
Heritage acquired Narragansett Bay Insurance Company (NBIC) in 2017 and the company is named ceding company for this new catastrophe bond, alongside Heritage’s P&C insurance entity and its Hawaii-based insurer, Zephyr.
But the Citrus Re Series 2022-1 Catastrophe Bond will initially only cover named storm hazards in the Northeastern United States, in the named states of Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Rhode Island and Virginia, which are the states where the insurer Narragansett Bay operates.
As always, Heritage may choose to include a wider range of states under this cat bonds reinsurance coverage on resets, but this will never include the Southeast and Gulf states, which are named Florida , Alabama, Louisiana, Texas and Mississippi, we’re told.
Thus, this new cat bond which will be issued by the specialist insurer of Heritage Citrus Re Ltd. in Bermuda is for all intents and purposes a Northeastern United States wind cat cat obligation, at least to begin with.
Citrus Re Ltd. will issue a currently $100 million single tranche of Series 2022-1 Class A bonds, which will be sold to catastrophe bond investors and the proceeds used to secure a reinsurance agreement with the company.
Protection of $100 million or more will cover losses caused by named storms in the named northeastern U.S. states, based on one event and one indemnity trigger, for a period of until June 2025, thus covering three full hurricane seasons in the United States, sources said Artemis.
We are told that the Class A Notes would peg at $390 million in losses and cover one share until depleted at $760 million, giving them an initial peg probability of 1.95% and a loss initial expected 1.57%.
The $100 million or more of Series 2022-1 Class A Notes issued by Citrus Re Ltd. are offered to investors with coupon price indications within the range of 4.25% to 5%, to our knowledge.
It’s good to see Heritage return to the cat bond market and it will be interesting to see how investors receive its first cat bond since 2017, especially as the company has benefited greatly from the reassurance its cat bonds provided in the past (some of which are detailed here).
You can find out all about this catastrophe bond Citrus Re Ltd. (series 2022-1) and all other catastrophe bonds issued in our extensive Artemis Deal Directory.