The California Earthquake Authority (CEA) has now successfully priced and secured its upsized target of $425 million of fully-collateralized earthquake reinsurance protection from its new Sutter Re Ltd. (Series 2026-1) catastrophe bond sponsorship, Artemis understands.
In a first update on this deal we reported that the CEA aimed to upsize this Sutter Re 2026-1 cat bond issuance with the target size increased by 33% to $400 million of protection being sought, while at the same time the price guidance was reduced.
In a second update to the size and pricing of its new cat bond, the CEA then raised the target size of the offering a second time, seeking $425 million of collateralized earthquake reinsurance limit while the price guidance for each of the tranches of Sutter Re Series 2026-1 cat bond notes on offer was lowered further.
Now, we understand from sources that the California Earthquake Authority (CEA) has successfully priced its latest catastrophe bond issuance to secure the $425 million of reinsurance protection, while securing strong execution in the market as both tranches of notes priced at their lowest-ends of spread guidance, well below the initial pricing ranges that were offered.
Currently, the CEA has $2.875 billion of outstanding catastrophe bond coverage still in-force at this time and sits in sixth place on our cat bond sponsors leaderboard.
This month, the CEA’s outstanding $425 million of reinsurance from the Sutter Re 2023-1 cat bond is scheduled to mature, so this new cat bond sponsorship is now confirmed to replace that capital markets protection for the insurer.
With this new cat bond deal priced, the CEA has now secured a new $425 million source of multi-year reinsurance limit across the two tranches of cat bond notes from this Sutter Re 2026-1 offering, which will provide the insurer with a four year source of fully-collateralized California earthquake reinsurance protection on an indemnity trigger and annual aggregate basis.
What was initially a $200 million tranche of Series 2026-1 Class C notes are the ones that upsized, having first been lifted to $300 million, then again to a target for $325 million of reinsurance limit which is where this tranche has been finalised, we are now told.
The Class C notes comes with an initial expected loss of 2.30% and were first offered to cat bond investors with price guidance in a range from 4.25% to 5%. The price guidance was first lowered to a revised range of 3.75% to 4.25%, then again to between 3.5% and 3.75%. These notes priced to pay investors an initial risk interest spread of 3.5%, so at the bottom-end of reduced guidance.
The second tranche of Series 2026-1 Class F cat bond notes remained at $100 million in size through the offering phase.
The Class F notes come with an initial expected loss of 4.05% and were first offered to cat bond investors with price guidance in a range from 6.5% to 7.25%. That was subsequently lowered to a revised range of 5.75% to 6.5%, then again to between 5.5% and 5.75%. In the end, sources said the Class F notes have been priced to pay investors a spread of 5.5%, again the low-end of reduced guidance.
The California Earthquake Authority (CEA) is one of the most consistent sponsors of catastrophe bonds, with this marking the 24th cat bond sponsorship we have tracked from the insurer.
View details of every catastrophe bond sponsored by the CEA in the Artemis Deal Directory.
You can read all about this new Sutter Re Ltd. (Series 2026-1) catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory.
