US insurance giant USAA has returned to the catastrophe bond market for its 46th catastrophe bond sponsorship that we have analysed and tracked, seeking $300 million or more in multi-peril per-occurrence catastrophe reinsurance protection from a Residential Reinsurance 2025 Limited (Series 2025-2) deal, Artemis has learned.
USAA is still the most consistent and long-standing catastrophe bond sponsor in the marketplace, having augmented and diversified its sources of catastrophe reinsurance protection using the capital markets since the beginning of the market back in 1997.
As we said, this new Residential Re 2025-2 cat bond is the 46th transaction we have tracked that is sponsored by USAA and there are now 45 issuances under the Residential Re name, as well as one named Espada Re cat bond, all of which are listed in our extensive Deal Directory.
USAA typically sponsors two catastrophe bond deals each year, one cat bond that provides the insurer with aggregate reinsurance protection around May, and a cat bond to provide per-occurrence coverage around November.
This issuance is the regular fourth-quarter occurrence cat bond deal from USAA and it sees the military mutual insurer looking to secure $300 million or more in multi-year and multi-peril catastrophe reinsurance from the capital markets.
Using the Residential Reinsurance 2025 Limited special purpose vehicle that was established for a $425 million aggregate cat bond issuance earlier this year, USAA is now bringing two tranches of Series 2025-2 occurrence catastrophe bond notes to investors, we’ve learned from market sources.
Both of the tranches of Series 2025-2 cat bond notes will be sold to investors and the proceeds used to collateralize underlying reinsurance agreements between the issuing vehicle and sponsor USAA, as is typical.
The two tranches of notes will provide USAA with four years of indemnity per-occurrence based reinsurance protection against losses from the typical perils that feature across all its catastrophe bond deals in recent years, being U.S. tropical cyclones, earthquakes (plus fire following), severe thunderstorm, winter storm, wildfire, volcanic eruption, meteorite impact, other perils (all including auto & renter policy flood losses), we are told.
Each of the tranches will provide USAA with four occurrence reinsurance protection running from December 1st 2025 through November 30th 2029.
USAA has come to market a little earlier than it typically does for its regular fourth-quarter occurrence catastrophe bond deal, perhaps looking to capitalise on the market being quiet at this time, but investor demand being high for new paper still.
That is also evident in the comparatively, compared to USAA’s cat bond a year ago, tight spread multiples on offer, that indicate strong execution is anticipated with this deal thanks to the spread tightening seen in the catastrophe bond market since the insurer’s last occurrence deal.
The first, Series 2025-2 Class 2 tranche of notes is preliminarily sized at $150 million and would attach their coverage at $2.25 billion of losses to USAA, exhausting at $3.2 billion, which gives them an initial base attachment probability of 8.87%, an initial base expected loss of 6.47% and they are being offered to cat bond investors with price guidance of 11.75% to 12.5%.
The second, Series 2025-2 Class 5 tranche of notes is also preliminarily sized at $150 million and their coverage would attach at $4.5 billion of losses to USAA, exhausting at $6.1 billion making them less risky, which results in an initial base attachment probability of 2.45%, an initial base expected loss of 1.82% and they are being offered to cat bond investors with price guidance of 4% to 4.5%.
Taking the initial base expected loss, the multiple-at-market at the mid-point of guidance for the higher risk Class 2 tranche of notes would be 1.87 times their expected loss (EL), while the multiple-at-market at the mid-point would be almost 2.34 times EL for the lower risk Class 5 tranche.
We can compare to last year’s issuance of an occurrence cat bond for USAA, that saw Class 2 notes with an initial expected loss of 6.14% priced at 13.25% for a multiple-at-market of 2.16 times EL, Class 3 notes with an initial expected loss of 3.25% that priced at 7% for a multiple of 2.15 times, and Class 4 notes with an initial expected loss of 2.05% that priced at 5.25% for a multiple of 2.56 times EL.
As a result, these new Residential Re Series 2025-2 tranches of occurrence cat bond notes look set to have tighter pricing than the previous year’s issuance, reflecting the spread tightening seen through 2025 so far.
With 46 catastrophe bond transactions from USAA now detailed in our Deal Directory, the insurer and its now 45 deal strong Residential Re cat bond program is the most prolific sponsor and program in the market, a regular and consistent feature since the cat bond instrument was first seen in late 1996 when USAA’s first began marketing.
You can read all about this new Residential Reinsurance 2025 Limited (Series 2025-2) catastrophe bond from USAA and view details on almost every other cat bond ever issued in our extensive Artemis Deal Directory.
