Priced cat bonds in the week to 28 April grew by 29% from their initial target size on a weighted average basis, with spreads settling 3% below the midpoints of initial guidance.
In the same week, $675mn of fresh limit entered the market across five tranches of notes.
The Texas Windstorm Insurance Association (Twia) and first-time sponsor the Texas FAIR Plan Association (TFPA) is seeking $575mn of that total new limit with the first ever Bluebonnet Re cat bond.
The 2025-1 notes are to the benefit of Twia, and will provide indemnity, annual aggregate protection against named Texas storm or severe thunderstorm event.
Twia traditionally accesses the catastrophe bond market via its Alamo Re deals, of which there are $2.1bn of notes on risk, with $200mn maturing in June this year.
The 2025-2 series is to the benefit of TFPA, and will provide indemnity, per occurrence protection against named Texas storm, severe thunderstorm and wildfire.
Among deals to place this week, Louisiana Citizens’ Bayou Re 2025-1 note upsized by 40% to $280mn, while pricing 10% below the initial midpoint of guidance at 700 basis points (bps).
The bond will provide protection in Louisiana against named storms on an indemnity, per occurrence, non-cascading basis.
Louisiana Citizens issued a single note this year, whereas historically it has issued a Class A and Class B note.
This year’s deal showed significant softening versus the prior-year comparative layer. The 700bps spread on the 2025 deal equated to a multiple of 3.8x, on the expected loss of 1.82% on the sensitivity case basis.
Last year’s Class A Bayou Re note paid a higher spread of 850bps producing a higher multiple of 6.7x, for a slightly lower expected loss of 1.26%.
The same trend of deals increasing in size while decreasing in price was also seen on bonds with updated terms, with sizes increasing 19% on a weighted average basis, while spreads fell 3%.
Secondary market markdowns
Two PCS index triggered bonds, Herbie Re 2021-1A and Claveau Re 2021-1, faced further markdowns on the secondary market.
Both bonds provide multi-peril cover on an annual aggregate basis, and were marked down further as investors baked in further losses after PCS increased its wildfire and Helene loss estimates.
Fidelis’ Herbie Re bond was marked down to 14.0c on the dollar at the bid/offer midpoint as of 18 April, down from 65.0c on the dollar the week prior, according to the pricing sheet of one broker.
Arch’s Claveau Re bond was marked down to 67.5c on dollar, down from 78.5c on the dollar the week prior.