Florida’s Citizens Property Insurance Corp. upsized its latest catastrophe bond twice—before pricing it Thursday, according to a person familiar with the transaction.
Everglades Re 2014-1 was launched on April 7 at $400 million; it was subsequently upsized to $1.25 billion and then upsized a second time to $1.5 billion.
Citigroup Global Markets is the sole structuring agent and bookrunner; Merrill Lynch Pierce Fenner & Smith is joint bookrunner.
The deal, which was offered to qualified institutional investors via the 144a market, has an expected term of three years and a preliminary B’ rating from Standard & Poor’s. It was priced to yield 7.5%
The notes provide reinsurance against commercial and residential property claims resulting from hurricanes on an annual aggregate basis. That means that losses from multiple smaller events could result in a triggering event, allowing Florida Citizens to hold use principal to pay claims. This is in contrast with Florida Citizens first two cat bonds, which were per-occurrence notes, according to the presale report.
The first risk period begins on the day after closing, through May 31, 2015. There are two annual reset periods beginning June 1, 2015 and 2016, according to the presale report. On each reset date, the attachment point will be reset to keep the probability of attachment within the 2.74% to 3.04% range. The initial annual expected loss is 2.30% and will be reset within the 2.15% to 2.45% range, and the initial exhaustion probability is 1.72%.
AIR Worldwide is the risk modeling agent.
Based on AIR's analysis, on a historical basis since 1900, there have been two years--1926 when two unnamed storms made landfall in Florida and 1992's Hurricane Andrew--that would have resulted in a loss to note holders.
This is the third issuance under the Everglades Re program; it also raised $750 million in 2012 and $250 million in 2013.