Gateway Re 2024-1 cat bond target increased, as price guidance lowered –

The target size for the Gateway Re Ltd. (Series 2024-1) catastrophe bond issuance that will benefit the SageSure linked SureChoice and Elevate reciprocal exchanges has now been increased, with up to $250 million of capital markets backed reinsurance now targeted from the deal.

At the same time, we understand that the pricing has been lowered, with both tranches of cat bond notes on offer now looking set for their spreads to be finalised at the bottom of the original guidance or below.

As we reported last month, coastal property managing general underwriter SageSure was back in the cat bond market with an up to $200 million target for the new Gateway Re 2024-1 deal.

SageSure has been building reinsurance capacity sourced from capital market investors through a series of Gateway named catastrophe bonds since May 2022.

This latest issuance looks to secure collateralized named storm reinsurance for its SureChoice Underwriters Reciprocal Exchange and the Elevate Reciprocal Exchange.

Gateway Re Ltd., a Bermuda domiciled SPI, is targeting issuance of two tranches of Series 2024-1 cat bond notes and was first aiming to secure between $100 million and $200 million of reinsurance across the two layers.

We’re now told that the layer targets have been updated, with between $175 million and $250 million of named storm reinsurance now sought.

The notes will provide the cedent reciprocal exchanges with indemnity trigger and per-occurrence structured named storm reinsurance, with one tranche providing one wind season of protection, the other offering cover across three seasons, initially for losses in Alabama, North and South Carolina, Louisiana, Mississippi, and Texas.

The first Class AA tranche of notes will run up to a maturity date of July 8th 2027 and have an initial expected loss of 1.1%, while they were first offered to cat bond investors with spread guidance in a range from 6.25% to 7%.

We’re now told this Class AA tranche of notes are targeted to be a $75 million to $100 million issuance, while their price guidance has been lowered to a new range of 5.5% to 6.25%.

The second Class A tranche of notes will provide single wind season coverage, running to December 23rd 2024,  and have an initial expected loss of 1.47%. They are structured as zero-coupon bonds and were first offered to cat bond investors with price guidance in a range from 90.75% to 91.75% of par (representing a rough spread equivalent of 8.25% to 9.25%).

We now understand this one-year Class A tranche of zero-coupon notes are targeted at between $100 million and $150 million in size, while their spread guidance has also been lowered, with a range of 92.5% to 91.75% of par pricing offered (representing an updated rough spread equivalent of 7.5% to 8.25%).

Meaning SageSure and these two of its reciprocal underwriting entities could secure more named storm reinsurance than originally targeted, at pricing levels at or below the bottom of the original spread guidance, which would be another example of strong execution and attractive pricing from the catastrophe bond market.

You can read all about this new Gateway Re Ltd. (Series 2024-1) catastrophe bond and every other cat bond deal in the Artemis Deal Directory.

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