State Farm’s Merna Re cat bond issuance has closed at $1bn, sources confirmed to Insurance Insider ILS.
This publication reported last month that the sponsor was seeking between $850mn-$1.1bn of limit, the latest of several mega-sized ILS transactions to hit the market in the past months.
The first of the three tranches in the latest Merna deal provides named Florida wind protection, sized at $250mn, the lower end of the $250mn-$350mn State Farm was seeking.
This note offers investors a spread of 725 basis points (bps) with an expected loss of 2.08%, giving a multiple of 3.5x.
The second tranche sized at $300mn, the upper end of the $250mn-$300mn the sponsor was seeking, with it understood that these notes will be structured to exclude first events in Florida, Texas and California and to exclude second events in Texas and California.
This note offers a spread of 875bps with an expected loss of 2.66%, giving a multiple of 3.3x.
The final tranche is believed to provide nationwide coverage on an aggregate basis, although details of the perils have not been disclosed by sources.
State Farm secured $450mn of limit for the third tranche, 63% higher than the initial midpoint of capacity the sponsor was hoping to secure. Sources last month had speculated that the size of this tranche could reach as high as $500mn.
The spread on this tranche is 850bps, with an expected loss of 1.8% and a multiple of 4.75x.
Previous Merna Re deals are known to have transferred ex-California quake risk to cat bond investors, with the new deal expanding this to include coverage also for Florida named storm and other nationwide risks.
The US mutual currently has $1.55bn of Merna Re cat bond coverage on risk, including $300mn that is scheduled to mature in July.
Insurance Insider ILS reported in November that State Farm was looking to target an additional $1bn of reinsurance limit for its 2024-25 property catastrophe program.
State Farm’s bond discussions come as several other large US carriers have looked to tap into cat bond market capacity for mega-size limits.
The Texas Windstorm Insurance Association secured $1.4bn of Alamo Re bond coverage earlier this month, more than double the $600mn initially targeted.
Florida Citizens is also seeking $850mn in cat bond limit across six Everglades Re tranches.
State Farm was approached for comment.