USAA, a US military mutual insurer, has returned to the catastrophe bond market with a new issuance, Residential Reinsurance 2026 Limited (Series 2026-2), aiming to secure $225 million or more in reinsurance. This marks the company’s 48th catastrophe bond, according to available data.
USAA Returns to Market
The new issuance is part of USAA’s regular practice of sponsoring catastrophe bonds around November to provide per-occurrence reinsurance coverage. This move also signals the reopening of the catastrophe bond market to broadly syndicated 144A deals after the typical hurricane season lull.
USAA has been a consistent and long-standing catastrophe bond sponsor since the beginning of cat bonds in 1997. The company has used the capital markets to add to and diversify its sources of catastrophe reinsurance protection. Its largest ever cat bond was an $825 million Residential Re 2026-1 deal sponsored in April.
The Residential Re 2026-2 issuance will provide USAA with four years of indemnity per-occurrence based reinsurance protection against losses from various perils, including U.S. tropical cyclones, earthquakes, and severe thunderstorms. The protection will run from December 1st, 2026, through November 30th, 2030.
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The issuance consists of three tranches of notes: Class 2, Class 3, and Class 5. The Class 2 tranche is preliminarily sized at $50 million, with an initial base attachment probability of 8.24% and an initial base expected loss of 6.04%.
The price guidance for the tranches ranges from 2.5% to 9.25%, with the multiples looking relatively low compared to last year’s occurrence cat bond from USAA.
The price multiples for the tranches are down commensurately with reinsurance price softening in property catastrophe risks. At their mid-points of price guidance, the Class 2 tranche would have a multiple of 1.47 times the expected loss, the Class 3 tranche would have a multiple of 1.57 times EL, and the Class 5 notes would have a multiple of 1.92 times EL.
These multiples can be compared to last year’s occurrence cat bond from USAA, which had a tranche with an initial expected loss of 6.47% that priced with a spread of 10.25% and a multiple of 1.58. The response of investors to this new issuance will be closely watched, as it may send a signal for what to expect in price terms through the rest of the year.
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Catastrophe Bond Program
With 48 catastrophe bond transactions now detailed, USAA’s Residential Re cat bond program is the most prolific sponsor and program in the market. The company’s consistent use of catastrophe bonds has made it a regular feature in the market since the cat bond instrument was first introduced in late 1996.
The details of the Residential Reinsurance 2026 Limited (Series 2026-2) catastrophe bond can be found in the Artemis Deal Directory, which provides information on almost every cat bond ever issued.
The Class 2 tranche attaches at $2.45 billion of losses to USAA, exhausting at $3.45 billion, with an initial base attachment probability of 8.24% and an initial base expected loss of 6.04%.
Tranche Details Revealed
The Class 5 tranche is larger, at $125 million, and attaches at $5.6 billion of losses to USAA, exhausting at $6.5 billion, with an initial base attachment probability of 1.72% and an initial base expected loss of 1.43%.
