The North Carolina Insurance Underwriting Association (NCIUA) is back in the catastrophe bond market with an initial target to secure $400 million of annual aggregate named storm reinsurance protection from a new Cape Lookout Re Ltd. (Series 2026-1) issuance, which will be its second with an embedded resilience bond feature, Artemis can report.
Last year’s cat bond from the NCIUA was also notable as the very first cat bond to include an additional resilience feature embedded in its terms, which we said at the time represented the first and only example of an insurance-linked securities (ILS) deal that also classifies as a true resilience bond.
Returning in 2026 for more capital markets backed reinsurance, the North Carolina Insurance Underwriting Association (NCIUA) is now looking to sponsor the eighth catastrophe bond under its Cape Lookout Re Ltd. program of deals.
The NCIUA has now been a long-standing sponsor of catastrophe bonds since at least 2009, when the first cat bond to benefit the Association, Parkton Re Ltd, came to market.
With this Cape Lookout Re 2026-1 cat bond launching to investors with an initial target to secure $400 million of reinsurance it also looks set to have a strong chance of becoming one of the largest in the series, as they have almost always upsized during their marketing.
The NCIUA, which is a property insurer of last resort for the state of North Carolina, is again seeking annual aggregate named storm and hurricane reinsurance with its latest cat bond deal, with the initial target to gain $400 million or more in multi-year and fully-collateralized protection from this Cape Lookout Re 2026-1 deal, Artemis has learned from sources.
Cape Lookout Re Ltd., the NCIUA’s Bermuda-based special purpose insurer (SPI), is aiming to issue two tranches of Series 2026-1 notes under this new cat bond, we understand.
The cat bond notes are now being offered to investors and the proceeds of their sale will be used to collateralize a retrocessional reinsurance agreement between Cape Lookout Re Ltd. and fronting reinsurer Hannover Re, who is again supporting the NCIUA’s latest cat bond deal.
Hannover Re, in fronting the capital markets for the insurer of last resort, will then enter into a reinsurance agreement directly with the North Carolina Insurance Underwriting Association (NCIUA) to pass on the named storm reinsurance protection to it.
The $400 million or more in notes will provide the NCIUA with indemnity and annual aggregate reinsurance protection from the capital markets, covering losses from named storms.
The notes will have a three year term to protect the NCIUA across three annual aggregate risk periods up to a date in March 2029, we are told and, as with other recent Cape Lookout Re cat bonds, qualifying loss events must exceed a $25 million or greater ultimate net loss impact to the insurer of last resort in order to count towards the aggregated totals for each tranche of notes.
A currently $100 million tranche of Cape Lookout Re Series 2026-1 Class A cat bond notes will sit at an attachment of $2.95 billion of losses, participating in a layer of the reinsurance tower to $3.25 billion, giving them an initial attachment probability of 2.19%, an initial expected loss of 2.04% and coming with price guidance in a range from 5.5% to 6%, we are told.
A currently $300 million tranche of Cape Lookout Re Series 2026-1 Class B cat bond notes are riskier and will sit at an attachment of $2.65 billion of losses, participating in a layer of the reinsurance tower to $2.95 billion, giving them an initial attachment probability of 2.57%, an initial expected loss of 2.37% and coming with price guidance in a range from 6.25% to 7%, we understand.
So only the Class A notes have room to upsize, which still gives the potential for this to become another $600 million issuance for the NCIUA if investor appetite responds positively.
For a price comparison, the Cape Lookout Re Series 2025-1 Class A cat bond notes issued last year came with an initial expected loss of 2.24% and priced to pay investors a spread of 6.9%.
We understand that this new Cape Lookout Re 2026-1 catastrophe bond again comes with a resilience trigger, with the NCIUA set to pay a resilience spread that can be allocated to a fund for installing fortified roofs, much like the 2025-1 issuance.
It’s good to see the NCIUA back in the catastrophe bond market and continuing to push the envelope with resilience features embedded in a cat bond for the second time.
You can read all about this new Cape Lookout Re Ltd. (Series 2025-1) transaction and every other cat bond ever issued in our Artemis Deal Directory.
