Mercury sets $150m Cal fire reinsurance target as price falls again for new Luca Re cat bond

Mercury General Corporation (Mercury Insurance), the California headquartered insurer, has now set the target for fire reinsurance limit from the new Luca Re Ltd. (Series 2026-1) catastrophe bond issuance at $150 million, while the price guidance for the notes had fallen for a second time, Artemis can report.

Mercury Insurance ventured back to the catastrophe bond market at the end of May, with an initial target to secure $100 million of California wildfire and fire following earthquake protection from the capital markets from what will become its second 144A cat bond sponsorship.

As we then reported in our first update on this deal, the Luca Re 2026-1 catastrophe bond offering was being marketed at between $125 million and $175 million, while the price guidance the notes were being offered with had been lowered.

Now, we’re told that the offering size has been updated to $150 million of Luca Re Series 2026-1 Class A cat bond notes, but that the price guidance has been reduced further, as Mercury Insurance targets strong price execution for its latest catastrophe bond sponsorship.

As a result, Luca Re Ltd. a special purpose insurer (SPI) based in Bermuda, is now offering a $150 million single tranche of Series 2026-1 Class A notes to investors, which is still up from the initial $100 million target.

The $150 million of Series 2026-1 cat bond notes that Luca Re is offering to investors will provide Mercury with a roughly three-year source of collateralized reinsurance protection against wildfire and fire-following earthquake losses in the state of California, on an indemnity trigger and per-occurrence basis.

The $150 million of Series 2026-1 Class A cat bond notes that Luca Re will issue come with an initial expected loss of 1.09%.

They were initially marketed with price guidance for a risk interest spread in a range from 6.25% to 6.75%, which was first revised to a lower range of between 5.75% and 6.25%. We’re now told the latest price guidance is for a spread of between 5.5% and 5.75%, as Mercury seeks stronger price execution again.

For comparison, the Series 2025-1 cat bond notes issued by Luca Re came with an initial expected loss of 1.08%, roughly the same as this new issuance, but priced to pay investors a significantly higher spread of 7.25%.

As a reminder, you can read all about this Luca Re Ltd. (Series 2026-1) catastrophe bond and every other cat bond deal in the extensive Artemis Deal Directory.