Following the mid-year reinsurance renewals the California Earthquake Authority (CEA) now sees catastrophe bonds making up an even larger proportion of its more than $7.83 billion risk transfer tower, at over 33% of the limit provided.The earthquake insurer had shrunk its overall reinsurance tower through the last couple of years, but at the same time maintained and now recently increased its reliance on catastrophe bonds.When we last reported on the CEA’s risk transfer tower, the organisation had renewed slightly more reinsurance protection at April 1st than matured, .As of April 1st 2025, the CEA had slight increased its traditional and collateralized or fronted reinsurance limit to just over $5.34 billion.

At the same time, the catastrophe bond component of the CEA’s risk transfer remained stable at $2.455 billion.Now, the latest data from July 31st, so after the busy mid-year renewals, sees the CEA’s traditional and collateralized or fronted reinsurance limit standing at just over $5.22 billion.The insurer did not renew all of the traditional or collateralized limit that expired around the renewal.

While the cat bond component of the tower has grown to $2.61 billion, thanks to the CEA’s latest Ursa Re sponsorship.The CEA had upsized its latest issuance in June by 60% to secure $400 million of limit, which grew the cat bond component of its protection.Meaning that, as of July 31st, the cat bond market’s share of the CEA’s reinsurance tower had increased to more than 33%.

That compares to 31% at January 31st, 32% by February 28th, and 31% again at April 1st, this year.The CEA’s risk transfer tower remains far smaller than it used to be, having at one stage reached 2024 reinsurance renewal season.It is expected to stabilise in time, but the attractive pricing and conditions in the catastrophe bond market has also supported the insurer, helping it to strategically fill its protection needs at the best terms and prices.

It’s going to be interesting to watch how the CEA approaches both reinsurance and catastrophe bond markets later this year and whether it continues to place an increasing emphasis on the value of longer-term coverage through the 144A cat bond market, as we’ve seen in the last year.The CEA has a further $505 million of catastrophe bonds scheduled to mature at the end of November 2025, so it will be interesting to see how much of that limit is renewed using its transformer vehicles.The CEA had further traditional reinsurance expiring at the July 31st date the latest disclosure is for and more to come at the end of September and again in December.

So how the tower evolves remains unknown at this stage, but it seems clear catastrophe bonds will remain around or close to one-third of it, perhaps a greater share if any more traditional limit is not renewed.The CEA has ..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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