The California Earthquake Authority (CEA) has substantially boosted its latest catastrophe bond endeavor, with the Ursa Re Ltd. (Series 2026-1) issuance now aiming for an impressive 0 million in fully-collateralized earthquake reinsurance. This upward revision of 50% from the initial 0 million target underscores the CEA's strategic efforts to enhance its reinsurance capacity amid favorable market dynamics, particularly in pricing.
Reports indicate that the CEA initially entered the catastrophe bond market in late October, seeking 0 million in reinsurance coverage through this new cat bond sponsorship. However, seizing the opportunity presented by current market conditions and attractive pricing, the authority has opted to expand the volume of reinsurance protection. Furthermore, there is an expectation that the pricing for this heightened coverage will be more advantageous than initially anticipated.
Currently, the CEA maintains a robust portfolio of .875 billion in active catastrophe bond coverage, positioning it as the fourth-largest sponsor in the cat bond market. As of April 2026, the earthquake insurer's total risk transfer capacity stood at over .2 billion, with the catastrophe bond sector contributing approximately 35% of this comprehensive total.
The Ursa Re 2026-1 cat bond represents the California Earthquake Authority's 25th engagement with the catastrophe bond market. This new issuance is structured to provide an expanded, roughly four-year source of fully-collateralized California earthquake reinsurance protection. The coverage operates on an indemnity trigger and an annual aggregate basis.
Initially, the Series 2026-1 Class D tranche of notes was set at 0 million but has now been increased to 0 million. These Class D notes feature an initial expected loss of 2.68%, with initial price guidance ranging from 4% to 4.5%. This guidance has since been adjusted downwards to a revised range of 3.75% to 4%. Similarly, the Series 2026-1 Class H tranche, initially 0 million, has been expanded to 0 million. The Class H notes carry an initial expected loss of 6.35% and were first offered with price guidance between 8.5% and 9.5%, which has also been revised lower to 8.25% to 8.5%.
Notably, the Class H notes are considered to have the highest expected loss for any catastrophe bond tranche sponsored by the CEA to date. With the latest target of 0 million, this new cat bond is poised to be the CEA's largest since 2017 and its second-largest catastrophe bond sponsorship in history.
The California Earthquake Authority is strategically leveraging current market conditions to secure a significantly larger volume of earthquake reinsurance through its Ursa Re Ltd. (Series 2026-1) catastrophe bond. This move not only enhances the CEA's financial resilience but also reflects a keen understanding of the favorable pricing environment, allowing for greater protection at a potentially reduced cost. The substantial increase in the issuance target underscores the CEA's commitment to robust risk management and its continued reliance on the catastrophe bond market as a critical component of its reinsurance strategy.
