Heritage Insurance has launched a new venture into the catastrophe bond market, aiming to secure at least $100 million in collateralized reinsurance specifically for US named storms.
The initiative, executed through the issuance of Citrus Re Ltd. Series 2024-1, marks the company’s ninth foray under the Citrus Re banner since its debut in 2014.
Heritage explained that this new program is part of an ongoing strategy to strengthen its reinsurance coverage against named storms in the southeastern US.
The latest Citrus Re 2024-1 bonds are structured to provide Heritage and its subsidiary, Narragansett Bay Insurance Company (NBIC), with multi-year protection against named storms. Initially focusing on states like Alabama, Florida, Georgia, Mississippi, North Carolina, and South Carolina, the coverage has the potential to extend to Maryland and Virginia.
The issuance involves two tranches of notes, each with a different risk profile. The Class A notes aim to raise $50 million, featuring a lower risk level with an attachment probability of 1.38% and an expected loss of 1.29%.
Conversely, the Class B notes, also seeking $50 million, carry a higher risk with an attachment probability of 1.64% and an expected loss of 1.5%.
Although the insurer is relying on the cat bond market for this new coverage, it is far from being the only option. A report from Bloomberg Intelligence suggests that alternative-reinsurance vehicles are poised to be the dominant source of capacity in the reinsurance segment this year, leading to pricing pressures within the segment.
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