Mercury General Corporation, the California headquartered insurer, has entered the 144A catastrophe bond market for the first time, seeking $100 million or more in reinsurance from the capital markets with a issuance that will cover it for wildfire and fire-following earthquake losses in its home state, Artemis has learned.Mercury has in the past sponsored four private catastrophe bonds under the Randolph Re name, but this will be the first Rule 144A cat bond for the company.It’s good to see Mercury turning to the capital markets at this time and perhaps understandable given the meaningful losses it suffered from the January 2025 California wildfires..

Recall that the private cat bond notes remain heavily discounted in the secondary market, marked for bids of just 10 cents on the dollar at this time, we understand.Still, no recovery has been made from those Randolph Re 2024-1 notes yet, but their maturity comes due early in July so there could be an extension of maturity looming.Mercury has established Luca Re Ltd.

in Bermuda to become a special purpose insurer (SPI) for the issuance of catastrophe bond notes to benefit the company, sources said.Luca Re Ltd.is targeting issuance of a single tranche of Series 2025-1 Class A notes, that will be sold to investors and the proceeds used to collateralize a reinsurance agreement between the SPI and Mercury underwriting entities.

The issuance has an initial target to secure $100 million of reinsurance for Mercury, but we understand that could grow given the layer the cat bond notes will occupy is larger.We’re told the Luca Re 2025-1 notes will provide reinsurance to protect Mercury’s losses under subsidiaries Mercury Casualty Company, Mercury Insurance Company, California Automobile Insurance Company and California General Underwriters Insurance Company, Inc.The $100 million or more in notes will provide Mercury with a three-year source of collateralized reinsurance against wildfire and fire-following earthquake losses in the state of California.

That protection will be on an indemnity and per-occurrence basis, with the notes having an initial attachment point of $1.6 billion and an exhaustion point at $1.75 billion of losses, we hear.As a result if the layer is to be filled this cat bond would need to upsize by 50% to $150 million.The $100 million of Series 2025-1 Class A notes that Luca Re is offering to investors come with an initial attachment probability of 1.16%, an initial expected loss of 1.08% and are being offered with spread price guidance in a range from 7.25% to 7.75%, we are told.

Worth noting that this is the second pure California fire exposed catastrophe bond of 2025, following on from Sutton National’s .In the wake of the devastating wildfires in the state it is good to see the cat bond market responding to provide capacity to those seeking diversified risk capital sources.It’s also good to see Mercury looking to bring the cat bond market into its reinsurance tower in a bigger way with its first 144A deal under Luca Re Ltd., following its series of cat bond lite deals.

Read all about this catastrophe bond as it comes to market and you can read about this and every other cat bond deal in the Artemis Deal Directory..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.Our can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.