Embarcadero Re (California Earthquake Authority, 2011)

The California Earthquake Authority is a public entity that sells earthquake insurance for California homes and whose solvency depends almost entirely on its reinsurance. Until 2011 it bought that protection only from reinsurers, which made it dependent on their pricing cycle. With Embarcadero Re, it entered into a reinsurance contract directly with a Bermuda vehicle that sold bonds to investors, without going through an intermediary reinsurer. The structure diversified its sources of capacity and obtained it at a lower cost than the traditional market. The authority later became one of the largest catastrophe bond issuers in the market.