A new catastrophe bond is being marketed to source broad, first and second event US named storm reinsurance protection for underwriting entities linked to coastal property managing general underwriter SageSure, with an initial $410 million target for this issuance.At this targeted size, the Gateway Re 2025-1 catastrophe bond issuance could become the largest yet for SageSure linked underwriting entities.While it is also the most complex, in terms of the structure and coverage of the capital markets backed reinsurance being sought, with three tranches designed to secure per-occurrence excess-of-loss reinsurance protection, while two others are designed to secure excess-of-loss second and subsequent coverage for the named entities, we have learned from sources.Gateway Re Ltd., the Bermuda domiciled special purpose insurer (SPI), is targeting issuance of five tranches of notes, that will be sold to catastrophe bond funds and investors and the proceeds used to collateralize reinsurance agreements between the SPI and the named ceding entities which are the SureChoice Underwriters Reciprocal Exchange and SafeChoice Insurance Company.

We’re told that other subsidiaries can be added as cedents to the reinsurance coverage if SageSure elected to over the term of the cat bond deal.All five classes of notes on offer will provide the SageSure underwriting entities with indemnity trigger based US named storm reinsurance protection, but with some differences between states and durations covered, as well as in terms of the first event per-occurrence, or second and subsequent event reinsurance, they will provide.In addition, three of the Series 2025-1 tranches Gateway Re Ltd.

will issue are set to be coupon bearing notes, while the other two are structured as zero-coupon notes, we understand.A $100 million tranche of Class AAA notes will provide named storm reinsurance across the states of Alabama, Louisiana, Mississippi, New York, North Carolina, South Carolina and Texas (with Virginia able to be included after a reset), over a three year term from July 1st 2025 on a per-occurrence and first event basis.The Class AAA notes would attach their coverage at $1.31 billion of losses and exhaust at $1.435 billion, giving them an initial attachment probability of 1.15%, an initial expected loss of 1.07% and they are being offered with price guidance in a range from 5% to 5.5%, we are told.

An $80 million tranche of Class AA notes will provide named storm reinsurance across the states of Alabama, Florida, Louisiana, Mississippi, New York, North Carolina, South Carolina and Texas, over a single wind season term from July 1st 2025 to December 15th, on a per-occurrence and first event basis.The Class AA notes are riskier and would attach their coverage at $525 million of losses and exhaust at $685 million, giving them an initial attachment probability of 2.39%, an initial expected loss of 1.79%.This is the first zero-coupon tranche of notes and they are being offered with price guidance in a range from 92.25% to 93%, which is a rough spread equivalent of 7% to 7.75%.

An also $80 million Class A tranche of notes will provide named storm reinsurance across the states of Alabama, Florida, Louisiana, Mississippi, New York, North Carolina, South Carolina and Texas (with Virginia able to be included after a reset), over a three year term from July 1st 2025 on a per-occurrence and first event basis.The Class A notes would attach their coverage at $525 million of losses and exhaust at $925 million, giving them an initial attachment probability of 4.82%, an initial expected loss of 3.17% and they are being offered with price guidance in a range from 11.25% to 12%, we understand.The next two tranches will both provide the second and subsequent event named storm reinsurance and we’re told there is an initial target to secure $150 million of protection across these two classes of notes, but no sizes have been attributed to them individually as yet, sources said.

A Class C1 tranche of notes will cover named storm risks in the states of Alabama, Florida, Louisiana, Mississippi, New York, North Carolina, South Carolina and Texas across a single wind season term, from July 1st 2025 to December 15th, on a second and subsequent event basis.The Class C1 notes would attach their coverage at $100 million of losses on a second event basis, exhausting it at $300 million, while there is a $200 million aggregate deductible for the coverage to become active for the next event.This gives them an initial attachment probability of 2.43%, an initial expected loss of 1.31% and they are zero-coupon in nature being offered with price guidance in a range from 91% to 91.75%, which is a rough spread equivalent of 8.25% to 9%.

A final Class C2 tranche of notes will cover named storm risks in the states of Alabama, Florida, Louisiana, Mississippi, New York, North Carolina, South Carolina and Texas (with Virginia able to be included after a reset), across a two wind season term, from July 1st 2025 to June 30th 2027, on a second and subsequent event basis.The Class C2 notes would attach their coverage at $100 million of losses on a second event basis, exhausting it at $300 million, while there is a $200 million aggregate deductible for the coverage to become active for the next event.This gives them an initial attachment probability of 2.43%, an initial expected loss of 1.31% and they are zero-coupon in nature being offered with price guidance in a range from 9.25% to 10%.

As we said, this is the most complex of the Gateway catastrophe bonds for SageSure entities yet, in terms of the structure and forms of the reinsurance coverage being sought from the capital market.It will be interesting to see how investors respond, as with a range of returns, exposures and options available to allocate to, this could receive broad support from the cat bond fund and investor base ending up being the largest cat bond issuance to-date for SageSure and its underwriting entities.You can read all about this new catastrophe bond and every other cat bond deal in the Artemis Deal Directory..

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