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GeoVera gets 75% upsized $175m Veraison Re cat bond with 10% price drop


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GeoVera Insurance Holdings, Ltd., an earthquake-focused residential property insurer, has now secured a 75% upsized $175 million in US earthquake reinsurance from its new Veraison Re Ltd. (Series 2024-1) catastrophe bond issuance, while the pricing was finalised 10% below the mid-point of initial guidance.

geovera-insurance-logoAs we’ve been reporting, GeoVera returned to the catastrophe bond market for the second time a few weeks ago, with its goal being to secure $100 million or more in earthquake reinsurance from the Veraison Re 2024-1 cat bond deal.

GeoVera sponsored its first ever catastrophe bond in late 2022, through which it secured $150 million of collateralized US earthquake reinsurance with a Veraison Re 2023-1 cat bond.

For 2024, GeoVera has again used its Bermuda licensed special purpose insurer (SPI) Veraison Re Ltd. and the 2024-1 cat bond was initially offered to investors as a single $100 million tranche of Series 2024-1 Class A notes, that would be exposed to losses from US earthquakes.

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As we later reported, the target size for the issuance was increased by 75%, with GeoVera aiming to secure $175 million in US quake reinsurance from the cat bond deal.

According to Artemis’ sources, we can report that this elevated level of protection has now been secured, as GeoVera has now successfully priced its latest catastrophe bond to provide it the upsized target of $175 million of earthquake reinsurance.

Therefore, this Veraison Re 2024-1 cat bond will provide GeoVera’s underwriting entities with $175 million of reinsurance protection against losses from US earthquakes over a three year term running from March 1st, on an indemnity trigger and per-occurrence basis.

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The $175 million of Class A notes on offer, would attach their reinsurance coverage for a US earthquake event that exceeded $700 million in losses to GeoVera, covering a commensurate percentage of losses up to an exhaustion point of $950 million.

The Veraison Re 2024-1 Class A cat bond notes come with an initial expected loss of 1%.

They were first offered to cat bond investors with spread guidance in a range from 5% to 5.5%, but as we later reported that the spread guidance was lowered, to a revised and narrower range of between 4.75% and 5%.

Now, we’re told that GeoVera has priced the $175 million of notes to pay cat bond investors a spread of 4.75%, which represents a 10% decline from the mid-point of initial price guidance for the company.

As we said before, the pricing of this new Veraison Re 2024-1 catastrophe bond is now confirmed to be significantly better for GeoVera than its late 2022 cat bond, which was issued when the market was facing some disruption in the wake of hurricane Ian and other global capital market challenges.

The most comparable tranche of notes from the December 2022 Veraison Re 2023-1 cat bond had an initial expected loss of 0.65% and priced to pay investors a spread of 6.5%, so had a multiple-at-market of 10 times the expected loss.

This new Veraison Re 2024-1 cat bond, with an EL of1% and spread of 4.75%, will pay investors 4.75 times the expected loss, so a far more efficient outcome for GeoVera with a much reduced cost of reinsurance.

You can read all about this Veraison Re Ltd. (Series 2024-1) in the extensive Artemis Deal Directory that includes details on almost every cat bond ever issued.

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