February 21, 2024

The Lower Ferry Re Ltd. (Series 2023-1) catastrophe bond offering has been priced to provide sponsor NJM Insurance with $190 million of designated storm reinsurance protection from the capital markets, well below the transaction’s maximum size target.

NJM Insurance Group LogoNJM (New Jersey Manufacturer) Insurance last entered the catastrophe bond market for reinsurance in 2013, when it sponsored a $60 million deal for Sullivan Re Ltd. (Series 2013-1).

The Northeast-focused insurer returns to Bermuda in 2023, setting up a vehicle incorporated as Lower Ferry Re Ltd. to issue a second catastrophe bond.

Two tranches of notes will be issued with an initial goal of securing $175 million in protection from the first Lower Ferry Re cat bond, which will provide NJM Insurance and its subsidiaries with three-year storm reinsurance protection in the Northeast United States to indemnify and on a per-occurrence basis.

But then we learned that the target size of the first Lower Ferry Re catastrophe bond was increased, and reinsurance of up to $225 million was subsequently sought.

Now we’re told the notes are priced and the net result is that this cat bond will provide NJM Insurance with $190 million of US named storm reinsurance across the Northeast states, so above the original target but off the revision There is still some distance to the upper limit. target amount.

Initially, the size of the Class A Notes was US$50 million, which was subsequently increased to US$75 million at the first renewal. We are now informed that the size of the Class A notes will be US$65 million.

The Class A Notes had an initial benchmark expected loss of 0.88%, with a guideline of 4.25% to 4.75% at initial issuance, which was subsequently narrowed to 4.25% to 4.5%. Pricing is at the low end of the guide, with a spread of 4.25%.

The riskier Class B Notes were originally $125 million and subsequently set at $150 million on the first update. We’re now told that the Class B tranche will be $125 million, which was the original goal.

The Class B Notes had an initial expected underlying loss of 1.36%, price guidance was provided at first suggesting a spread between 4.75% and 5.5% and subsequently fixed at 5%, which is how the Notes are priced, so in the lower range – guided half.

As it turns out, NJM Insurance clearly focused on price and size and chose to ensure the best pricing execution possible, while giving up some of the size of the second cat bond.

You’ve read all about the new Lower Ferry Re Ltd. (Series 2023-1) cat bond deal and all the other cat bonds in the Artemis deals directory.

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