The California Earthquake Authority’s (CEA) risk transfer tower increased in size after the organisation renewed slightly more reinsurance protection at April 1st than was maturing, leaving it with almost $7.8 billion of risk transfer in-force.
With almost $1.124 billion of traditional reinsurance set to expire at March 31st this year, the latest disclosure from the earthquake insurer shows that it renewed $1.2 billion of limit at the April renewal.
As a result, traditional and collateralized or fronted reinsurance limit grew to just over $5.34 billion, up from the February figure of almost $5.27 billion.
The catastrophe bond component of the CEA’s risk transfer remained stable at $2.455 billion as of April 2025.
Which left the cat bond component of the risk transfer tower at approximately 31.5% in April, just slightly down from the almost 32% as of late February.
The CEA has $245 million of its outstanding catastrophe bonds that mature next week.
But, as we’ve been reporting, the insurer is back in the cat bond market with a new Ursa Re II Ltd. (Series 2025-1) issuance, the latest target for which is to secure between $300 million and $400 million of additional reinsurance limit.
Which will increase the amount of cat bond risk capital the CEA has outstanding in the coming days, presumably to between $2.51 billion and as much as $2.61 billion (based on the latest projection), when the new Ursa Re II issuance settles.
But, it is as yet unknown how the CEA has renewed additional reinsurance coverage that expired at May 31st, which amounted to $185.5 million.
While, also at the mid-year renewals, the CEA has a further $120 million of traditional reinsurance that expires after June 21st and a larger $580.75 million that expires at July 31st 2025.
The one thing that is clear, is that the catastrophe bond protection will grow, with no more cat bond maturities to come until the end of November.
Notably though, with the CEA’s risk transfer tower now smaller than it used to be, having at one stage reached just over $9.15 billion of limit as recently as following the June 2024 reinsurance renewal season, the smaller tower is resulting in lower risk transfer expenses for the insurer, as you’d expect.
As of January 31st 2025, the CEA’s risk transfer expenses had fallen by $14 million, a figure that has likely increased with the passage of time and the tower was still slightly bigger at that date than it is today.
Also helping the CEA on risk transfer expenses are the slightly softer property catastrophe reinsurance market conditions and the fact its new Ursa Re II cat bond may come in with a spread multiple lower than issuances completed a year or two ago.
The CEA has $2.455 billion of outstanding catastrophe bond coverage still in-force at this time, but in recent months it has fallen from 3rd to 6th in our cat bond sponsors leaderboard as other sponsors grew their cat bond protection.
View details of every catastrophe bond sponsored by the CEA in the Artemis Deal Directory.
