Heritage’s $100m Citrus Re 2024-1 cat bond to price within guidance – Artemis.bm

In what could be considered a positive development in a catastrophe bond market that has seen pricing softening, the latest catastrophe bond from Heritage Insurance Holdings, Inc. looks set to be priced within its initial guidance, while the target remains for $100 million in collateralized US named storm reinsurance from the Citrus Re Ltd. (Series 2024-1) issuance.

We wrote last week that cat bond price changes had turned negative so far this quarter, with the majority of deals seeing their finalised pricing below the initial guidance.

Supply of capital has been a significant factor here, but now with the catastrophe bond market pipeline having built up considerably, there is more risk to absorb and supply and demand are beginning to appear more matched.

Hence, this latest deal from Heritage Insurance Holdings, Inc., the nationally expansive and Florida headquartered property and casualty insurer, may be looked on as a signal that risk appetites are becoming more balanced, in terms of it not pricing down significantly.

It also shows cat bond investors are maintaining their return requirements for pure US wind risk at this time.

Heritage is still targeting $100 million of reinsurance from this new cat bond deal which was first launched in late February, with no signs of it upsizing so far, we understand.

The Citrus Re Series 2024-1 cat bond notes are targeted to provide Heritage Property & Casualty Insurance Company, as well as its subsidiary Narragansett Bay Insurance Company (NBIC), with a multi-year source of southeast US named storm reinsurance protection, on an indemnity trigger and per-occurrence basis, across a three-year term from June 1st 2024 to June 2027.

The named storm and hurricane reinsurance protection will initially be for the US states of Alabama, Florida, Georgia, Mississippi, North Carolina and South Carolina, but the coverage area can be expanded to also include Maryland and Virginia at a future update.

The still $50 million tranche of Class A notes have an initial expected loss of 1.29% and were first offered to investors with spread guidance in a range from 9% to 9.75%. We’re now told that the guidance has been updated to 9.25%, so towards the lower-end of initial guidance, but importantly still within it.

The still $50 million Class B tranche of notes are riskier, with an initial expected loss of 1.5% and these notes were initially offered to investors with spread guidance in a range from 10% to 10.75%. We’re now told that the Class B notes guidance has been updated to 10.5%, so within the upper-half of the initially marketed range.

One deal is not enough to call for an end to the spread tightening we’ve seen in the market of late, but it is a positive signal for investor appetites becoming more satisfied now the pipeline is building and there is an anticipation for some larger issuances over the coming weeks to absorb more excess capital from the market.

You can read all about this Citrus Re Ltd. (Series 2024-1)  catastrophe bond and every other cat bond issued in our extensive Artemis Deal Directory.

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