Sempra Energy is sponsoring SD Re Ltd. series 2018-1, a $125 million California wildfire catastrophe bond, Artemis reported.
The transaction would provide Sempra with three-year coverage against losses from wildfires in the state caused by its own infrastructure or facilities.
The catastrophe bond comes with an indemnity trigger arrangement and will cover losses of up to $1.47 billion. It also includes a $50 million franchise deductible per event.
The transaction will have an initial attachment point of approximately $1.33 billion. The notes are expected to have a modeled initial attachment probability of 0.21% and an initial expected loss of 0.21%. The notes reportedly have a coupon pricing guidance of 3.5% to 4.5%.
Proceeds will be used to finance the three-year reinsurance agreement with Hannover Re, which serves as the ceding reinsurance firm.