The California Earthquake Authority (CEA) has maintained its reinsurance and disaster bond tower at $9.1 billion in dimension via the beginning of 2024, with its most up-to-date renewals for April 1st seeing the insurer securing nearly $1.2 billion in safety.
Once we final coated the CEA, we reported that the group had reached December 31st 2023 with $9.1 billion of protection in-force from its reinsurance and cat bonds.
That was based mostly on finish of yr information and the CEA had a major reinsurance renewal at January 1st as properly, however we’ve now discovered that the earthquake insurer has come via that and April renewals and maintained the identical stage of disaster threat switch safety.
Renewing such a big threat switch program just isn’t with out its challenges and the CEA has stated earlier than that its risk-transfer prices and the quantity of threat switch wanted are its largest monetary headwinds.
For full-year 2023, the CEA’s threat switch bills reached $585 million, which was up 18% on the earlier yr, as the results of the laborious reinsurance market took maintain.
Managing meaning needing extra fee coming in on the inward earthquake insurance coverage facet of the CEA’s enterprise, however the Authority can be very tactical in its reinsurance and disaster bond shopping for as properly, because it seems to handle market cycles.
Again in March, the CEA’s management staff heard that the danger switch market was “modestly enhancing”, which helped it improve its total reinsurance and cat bond tower to round $9.1 billion for the beginning of 2024.
The CEA’s authorised threat switch funds can be set at slightly below $585 million for 2024, of which by April thirtieth 37.6% or simply over $220 million has been used.
On the key 1/1 reinsurance renewal this yr, some $2.2 billion of the CEA’s reinsurance contracts in-force had been resulting from expire and it seems had been greater than renewed, with over $2.57 billion of reinsurance secured at January 2024.
After April 1st, which is likely one of the CEA’s bigger reinsurance renewal durations, the dimensions of the danger switch tower has not modified, with nonetheless $9.1 billion of reinsurance and cat bonds in-force at the moment.
On the current April renewal, the CEA secured slightly below $1.16 billion in new reinsurance, serving to to keep up its threat switch program on the identical stature it had reached on the finish of 2023.
Which suggests the CEA has renewed $3.73 billion of reinsurance in 2024 to date.
The CEA has not sponsored a brand new disaster bond since final December, in order of immediately, the CEA nonetheless has $2.27 billion of outstanding catastrophe bond coverage, as you can see in our cat bond sponsors leaderboard where the CEA is in 5th position currently.
However disaster bonds stay a really vital contributor to the CEA’s threat switch preparations, whereas the insurer additionally utilises different ILS market options in fronted reinsurance type, we perceive.
View details of every catastrophe bond sponsored by the CEA in the Artemis Deal Directory.
The CEA’s reinsurance tower had shrunk to around $8.2 billion after the January 2023 renewal, and nonetheless stays smaller than the $9.44 billion excessive it reached on the finish of 2021.
The CEA now has one other $85.5 million of reinsurance that expired on the finish of Could 2024 and an extra nearly $800 million of reinsurance cowl expiring earlier than the top of July this yr.
So we anticipate the CEA might be busy available in the market at the moment, renewing and changing a lot of this expiring safety and will probably be attention-grabbing to see if the tower grows when the following information turns into out there to us.
Lastly, the CEA’s subsequent disaster bond maturity is scheduled for the top of November this yr, so will probably be attention-grabbing to see if the insurer comes again to market to exchange that $215 million Ursa Re II Ltd. (Series 2021-1) issuance.
With the cat bond market eager for diversifying dangers at the moment, given the US wind heavy issuance we’ve seen, a brand new cat bond from the CEA is likely to be welcomed and will obtain a constructive investor response.
View details of every catastrophe bond sponsored by the CEA in the Artemis Deal Directory.
