The North Carolina Farm Bureau has now increased its storm protection target for storm reinsurance in the capital markets through its first Blue Ridge Re Ltd. (series 2023-1) issuance of catalytic bonds, with the deal now proposed at a suggested amount of $400 million, split equally between the two proposed tranches.
At the same time, we understand that the pricing of each tranche appears to be finalized within the original forecasts, although potentially towards the upper half of the proposed ranges.
With this Blue Ridge Re catastrophe bond, the nonprofit agricultural organization and insurer seeks reinsurance against storm losses in its home state of North Carolina.
At launch, this offering was intended to secure $250 million in named storm reinsurance for the NC Farm Bureau.on a compensation trigger basis and per event, over three full calendar years from January 1, 2024.
We are now told that the target size has been updated to $400 million, representing a significant increase in the reassurance sought under this catalytic bond deal.
The two proposed tranches of notes were initially expected to be worth $125 million, but are now worth $200 million each, we understand.
The Series 2023-1 Class A Notes tranche is lower risk, with an expected initial loss of 0.98% and was initially offered with pricing guidance of a spread of 5% to 5.5 %. We now understand that this figure has been updated to between 5.25% and 5.5%, so we believe this will end in the upper half of the forecast.
The Class B note tranche has an initial expected loss of 1.91% and was initially offered with price guidance ranging from 7.5% to 8%. We are now told that this tranche has a spread set in the upper 8% range.
Thus, another first-time catastrophe bond sponsor appears poised to secure more reinsurance than it originally anticipated, with the price of that reinsurance being in line with its initial expectations, thus a good outcome for the NC Farm Bureau.
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