Aon Securities arranges $500m surplus note for California-based CSAA

Insurance and reinsurance broker Aon’s investment banking and capital markets division, Aon Securities, has structured and placed $500 million surplus notes issued by Northern California insurer CSAA Insurance Exchange, Reinsurance News understands.

The $500 million, 8.125% surplus notes, due February 2045, have been assigned a Long-Term Issue Credit Rating of “a-” (Excellent) by AM Best, with a negative outlook.

According to the rating agency, the purpose of the surplus notes are to support the insurer’s capital in expectation of further premium growth and provide an additional layer of protection for catastrophe events, and also enhance the company’s financial flexibility.

“Following the surplus notes issuance, the financial leverage at CSAA will be well within AM Best’s guidelines for the rating and the interest coverage is expected to be strong,” explains the ratings agency.

This publication has learned that Aon Securities structured and placed these notes for the California insurer, which is promising so soon after the devastating and extremely costly Los Angeles wildfires.

Of course, the recent wildfires occurred in Southern California, and CSAA operates in the north, so this issuance of surplus isn’t driven by needing capital after the fires, rather it’s because the insurer wants capital to expand.

But what’s promising is that Aon Securities structuring and arranging a source of capital for an insurance carrier in California, shows there is still appetite to support carriers in the region despite the impacts of the most expensive insured wildfire loss event in history

As reported by AM Best, the surplus notes are callable at par any time after 10 years from the issue date, in whole or in part, with 30 days prior notice and prior approval by the California Department of Insurance.

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