NJM Insurance has now successfully secured the upsized $250 million of northeast US named storm reinsurance from the capital markets with its new Lower Ferry Re Ltd. (Series 2026-1) issuance, with all three tranches of notes pricing below initial guidance, Artemis can report.
We explained at the time that whilst three tranches of notes were offered at first only two were sized, initially giving NJM Insurance a target of securing $150 million or more in reinsurance protection.
Then in our first update on this transaction, we reported that the unsized tranche had been sized, while the other two tranches also increased slightly, taking the total target for northeast US named storm reinsurance limit to $250 million with this deal.
At the same time, we also learned that the price guidance had fallen for all three tranches of Series 2026-1 notes that Lower Ferry Re was offering.
Now, we’re told NJM Insurance has achieved this raised goal, in securing the higher level of US named storm reinsurance, making this the company’s largest catastrophe bond sponsorship to date, while all three notes have priced at the low-ends of their reduced spread guidance.
NJM Insurance had previously sponsored two cat bonds, a $60 million Sullivan Re Ltd. (Series 2013-1) transaction over a decade ago and more recently a $190 million Lower Ferry Re Ltd. (Series 2023-1) catastrophe bond.
As we’ve explained before, the Lower Ferry Re 2023-1 cat bond is scheduled to mature this month. Now, with this $250 million Lower Ferry Re Ltd. (Series 2026-1) cat bond now priced, NJM Insurance will be able to more than replace the reinsurance protection that expiring cat bond had provided it with.
So, now finalised and priced the three tranches of Lower Ferry Re 2026-1 cat bond notes will provide NJM Insurance with a $250 million source of fully-collateralized US named storm reinsurance protection covering Northeast US states, with the protection structured on an indemnity and per-occurrence basis and set to run for a roughly three-year term.
The Class A tranche of notes that will sit highest up in the sponsors reinsurance tower were initially unsized, but as we later reported, were targeted at $70 million of limit for NJM Insurance, which is where we understand the notes have been priced.
The Class A notes are the least risky, coming with a base expected loss of 1.18%. They were first offered to investors with price guidance ranging in a spread of between 3% and 3.5%, which later fell to a tighter range of 2.75% to 3%. We’re now told these notes priced to pay investors a spread of 2.75%, so the bottom-end of reduced guidance.
What was initially marketed as a $50 million Class B tranche of notes were later upsized to $55 million, which is where we understand these notes have now been priced.
The Class B notes come with an initial base expected loss of 1.49% and were first offered to investors with price guidance indicating a spread of between 3.25% and 3.75%, which later fell to a tighter range of between 3% and 3.25%. We’ve now been told these notes have been priced to pay investors a spread of 3%, so below the initially marketed range.
The final Class C tranche of notes were initially marketed at $100 million, but were later offered as a $125 million layer, which is where the notes have been priced.
The Class C notes come with an initial base expected loss of 2% and were first offered to cat bond investors with price guidance for a spread of between 4.25% and 4.75%, which again had also fallen, to a revised price guidance range of 4% to 4.25%. We understand the notes have been priced to pay investors a spread of 4%, so once again, below the initially marketed range.
NJM Insurance has received very strong support from the catastrophe bond investor base, allowing it to secure its maximum target for reinsurance from the cat bond market at much better than anticipated pricing.
As a reminder, you read all about this new Lower Ferry Re Ltd. (Series 2026-1) cat bond transaction and every other catastrophe bond in the Artemis Deal Directory.
