Heritage’s New 2022 Citrus Re Catalytic Bond Priced Above Expectations

Heritage Insurance Holdings, Inc., headquartered in Florida but nationwide, has now secured its new catastrophe bond Citrus Re Ltd. (series 2022-1) with an initial amount of $100 million, but with prices now set above the initial range.

This is the latest signal on the pricing of wind-exposed reinsurance protection in the US in the form of catastrophe bonds, while the pricing also likely reflects the fact that Heritage has benefited from a number of recoveries through its catastrophe bond program in the past.

Heritage returned to the catastrophe bond market for the first time since 2017 around mid-March, seeking $100 million or more in named storm protection in the northeastern United States for carriers acquired the portfolio of Narrangasett Bay insurance with this Citrus Re 2022-1 cat bond.

The Citrus Re Series 2022-1 catastrophe bond will provide Heritage with reinsurance protection against named storm risks in the Northeastern United States in the states of Connecticut, Delaware, Maryland, Massachusetts, New Jersey , New York, Rhode Island and Virginia, the places where its Narragansett Bay insurance subsidiary operates.

The chat bond can be reset to include other states, but these exclude the most hurricane-prone states of South Florida, Alabama, Louisiana, Texas, and Mississippi and ceding Named for this issue Citrus Re 2022-1 also includes Hawaii-based insurer Zephyr, another of Heritage Carriers, although the initial coverage area does not include Hawaii.

So, now finalized and priced, the Citrus Re 2022-1 catalytic bond will provide $100 million of reinsurance protection to cover Heritage’s losses from named storms in the named northeastern U.S. states, on on a per-event, per-trigger basis, through a term that runs through June 2025, thus including three full US hurricane seasons.

The Citrus Re Series 2022-1 Class A Notes will attach to $390 million in losses and cover a portion of Heritage’s exposure to a depletion point of $760 million, giving them an initial match probability of 1.95% and an expected initial loss of 1.57%.

The $100 million Series 2022-1 Class A Notes issued by Citrus Re Ltd. were initially marketed to investors with coupon price indications in the range of 4.25% to 5%.

The price has risen and has now finalized above that initial range, with the $100 million of notes expected to pay investors a 5.1% coupon, we now understand.

Heritage has benefited greatly from the reinsurance recoveries that its cat bonds have provided in the past (some of which are detailed here), so it is good to see the insurer continuing to place cat bonds in its reinsurance arrangements.

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.

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