The California Earthquake Authority (CEA) has returned to the catastrophe bond market to sponsor its third issuance this year and with an initial target to secure $600 million in fully-collateralized earthquake reinsurance from this issuance it could become one of its largest cat bonds ever.As said, this is the California Earthquake Authority’s third visit to the catastrophe bond market in 2025, having successfully secured $400 million of reinsurance through the Ursa Re Ltd.(Series 2025-1) issuance in February and then a further $400 million of protection through the in June.The CEA has .

But, the insurer will see some $505 million of its catastrophe bonds mature at the end of November 2025.Meaning that with an initial $600 million target this new issuance could more than replace that and grow the CEA’s cat bond risk protection that is outstanding.It’s encouraging to see the CEA continuing to seek out capital source diversification for its reinsurance tower,  and this new issuance will become .

Notably and indicative of the state of pricing in the catastrophe bond market at this time and catastrophe reinsurance markets in general, the price guidance (in multiple-at-market terms) for the $600 million of notes on offer is right at the lowest-end of where the California Earthquake Authority’s (CEA) cat bonds have settled over the more than two decades it has been sponsoring the instruments.We understand from sources that through Ursa Re II Ltd., the CEA is targeting issuance of two tranches of Series 2025-2 catastrophe bond notes.These notes are set to be sold to cat bond investors and the proceeds will be used to collateralize reinsurance agreements between the issuing vehicle Ursa Re II Ltd.

and the CEA.The Ursa Re II Series 2025-2 cat bond notes will provide the CEA with an up to four year source of fully-collateralized California earthquake reinsurance protection.The protection will be afforded on an indemnity trigger and annual aggregate basis, which is typical of the Authority’s cat bond deals.

With $600 million of reinsurance limit targeted across the two tranches of cat bond notes, one is set to provide four years of protection, the other around two and a half years, as the CEA continues to stagger its maturities to match the profile of its protection needs, we are told.A currently $200 million Series 2025-2 Class E tranche of notes will provide the CEA with four years of annual aggregate California earthquake reinsurance protection, running to the end of November 2029, sources said.The Class E notes would attach their coverage at $3.831 billion of losses and share in a $500 million layer, giving them an initial attachment point of 3.47%, an initial expected loss of 3.28% and they are being offered to investors with price guidance in a range from 5.25% to 6%.

A currently $400 million Series 2025-2 Class FG tranche of notes will offer the CEA around two and a half years of annual aggregate California earthquake reinsurance protection, running to the end of May 2028, we have been told.The Class FG notes are riskier and would attach their coverage at $2.293 billion of losses, sharing in a $500 million layer, giving them an initial attachment point of 5.16%, an initial expected loss of 4.81% and they are being offered to investors with price guidance in a range from 7.75% to 8.5%, sources said.At the mid-points of the guidance range for spreads, the Class E notes would come with a multiple-at-market of almost 1.72 times expected loss, while the Class FG notes would come with a multiple of almost 1.69 times expected loss.

Those are particularly low spread multiples of expected loss for any of the CEA’s catastrophe bonds it has ever sponsored.In fact, according to Artemis’ data, if these new Ursa Re II Series 2025-2 cat bond tranches price at the mid-points of their initial spread guidance, they would be settling with two of the three lowest multiples-at-market of any of the CEA’s catastrophe bonds it has ever sponsored.Which indicates the insurer is targeting very strong execution and attractive pricing for its reinsurance from these new cat bonds.

So we’d imagine there is a good chance the deals could get upsized, if the response from investors is positive.You can read all about this new catastrophe bond from the California Earthquake Authority (CEA) and every other cat bond ever issued in the extensive Artemis Deal Directory..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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