US military mutual insurer USAA has now set its sights on the upper-end issuance size of $825 million of reinsurance from its new Residential Reinsurance 2026 Limited (Series 2026-1) catastrophe bond sponsorship, while the company has made further adjustments to the price guidance for two of the three tranches of notes on offer, Artemis has learned.
We said at the time that at $600 million this would equal USAA’s largest cat bond sponsorship from back in 2007.
In our first update, we learned that USAA had increased the target size for this Residential Re 2026-1 issuance to between $800 million and as much as $825 million, while some adjustments were made to the size and pricing for each of the three tranches of notes on offer
Now, it appears that USAA has set its sights on the upper-end issuance size of $825 million for its latest catastrophe bond sponsorship, while looking to capitalise on investor appetites it has made further pricing adjustments to two of the tranches of notes on offer.
At $825 million, it also appears that this new deal is now highly likely to become USAA’s largest cat bond sponsorship ever.
You can read about every one of USAA’s 46 issuances under the Residential Re name, as well as one named Espada Re cat bond, in our extensive Deal Directory.
The three tranches of Series 2026-1 notes that Residential Reinsurance 2026 Limited is set to issue will provide USAA with roughly four years of indemnity based reinsurance protection against losses from the same range of perils that typically feature in its catastrophe bond deals, these being U.S. tropical cyclones, earthquakes (plus fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact and other perils.
Both the Class 14 and Class 15 tranches will provide annual aggregate protection across the U.S. and feature a $60 million event deductible.
The third Class A tranche will provide per-occurrence protection in Florida only, a notable inclusion for USAA in its latest cat bond. Both auto and renter policy flood losses are included under the aggregate tranche coverage, while only renter policy flood losses are included under the Florida occurrence tranche.
As we’ve explained before, this Residential Reinsurance 2026 Limited (Series 2026-1) cat bond comes with multiple versions of key risk metrics, given the adoption of a new model version covering severe convective storm (SCS) risk.
We previously reported that USAA is managing that model change within some of its earlier outstanding cat bonds, which you can read more about here.
A still targeted $150 million Class 14 tranche of aggregate notes have an initial base expected loss of 6.1% under the new model version and 0.98% under the older risk model version.
These notes were initially offered to cat bond investors with price guidance of 5.75% to 6.5%, which was then later revised to a single figure of 6.5%, which is where they remain, so the top-end of guidance.
What was a $150 million tranche of aggregate Class 15 notes are now targeted at $175 million in size. The Class 15 notes have an initial base expected loss of 2.71% under the new model version and 0.59% under the older risk model version.
These notes were originally offered to cat bond investors with price guidance of 4.75% to 5.5%, which then lowered to a tighter spread of 4.5% to 4.75%. We are told that guidance has now been revised to a single figure of 4.5%, so below the initial guidance range.
The final Class A tranche of notes are the Florida focused per-occurrence tranche.
These notes were initially $300 million in size but were then later upsized to $500 million in issuance size, which is where they remain.
These Class A notes have an initial attachment initial base expected loss of 2.51% under the new model version, or 2.52% under the older risk model version.
These notes were originally offered to cat bond investors with price guidance of 7% to 7.75%, which then reduced to between 6% and 7%. We are now told that price guidance has reduced once again to an updated range of 5.75% to 6%.
USAA has been adjusting both size and pricing for its latest catastrophe bond sponsorship to capitalise on investor demand at this time. We’ll make sure to update you when this Residential Re 2026-1 issuance is eventually priced.
As a reminder, you can read all about this new Residential Reinsurance 2026 Limited (Series 2026-1) catastrophe bond from USAA and view details on almost every other cat bond ever issued in our extensive Artemis Deal Directory.
