Bermuda Stock Exchange breaks record for insurance-linked securities listings

by Artemis on January 9, 2012

The Bermuda Stock Exchange (BSX) has issued a press release concerning the volume of catastrophe bonds and insurance-linked securities that the exchange now plays host to. At the end of 2011 the BSX has for the first time reached over $3 billion in listed cat bond and ILS securities on the exchange.

As of 31st December 2011 the BSX reports that 25 ILS are listed on the exchange with a total value of $3.373 billion. The BSX has been working hard to promote itself as the go-to listing destination for ILS and cat bonds and thanks to regulatory changes made back in 2009 by the Bermuda Monetary Authority to make the island a more attractive domicile for these securities and a concerted marketing effort the efforts seem to be working.

“We are absolutely delighted with how 2011 has been for the BSX,” said Greg Wojciechowski, President and CEO of the BSX. “We set out in 2010 to firstly raise the profile of Bermuda and the exchange, and secondly to attract more ILS to the island and to list on the exchange. We feel we have achieved a great deal in the last two years.”

Of the 25 listed insurance linked securities on the BSX four are securitization programs, 13 are notes issued under these programs, six are tranches of ILS notes issued as stand-alone securities and two are specialist exchange trade fund classes.

“All of this activity has happened in the space of about two years,” said Mr. Wojciechowski. “The momentum is driven largely by the BMA’s revised regulations, which in late 2009 established a new designation for ‘special-purpose insurers’ (SPI) as part of its supervisory scheme. This has been a very positive step for SPI’s setting up in Bermuda wanting to issue ILS such as catastrophe bonds, and we have been able to offer them the option of listing these ILS on the exchange.”

According to the Bermuda Monetary Authority, 23 special-purpose insurers were formed in Bermuda during 2011, with the majority of these formations created specifically to issue catastrophe bonds or create sidecars. In 2010, 10 were formed during the same period so clearly the push to attract this business to the island is working.

Mr Wojciechowski added: “Bermuda is the world’s third largest reinsurance market and is already home to 1400 insurance companies with total assets of $442 billion, and is a natural place for setting up ILS. Many of our reinsurance companies have issued cat bonds or set up special purpose vehicles such as side cars – so we have a historical interest and knowledge.

“At the exchange, we are looking to support it from a capital markets perspective any way we can. Institutional investors such as pension and endowment funds are interested particularly in ILS because of the low correlation between ILS and capital markets. ILS are a natural hedge to capital markets, and listing on the exchange gives them that bit more security.

“In Bermuda, we also have a critical mass of insurers and reinsurers, the infrastructure to deal with them, and the rigorous regulation from the Bermuda Monetary Authority and the Bermuda Stock Exchange.”

Our Deal Directory contains the details of the majority of the cat bonds and ILS securitizations which are listed on the Bermuda Stock Exchange. The BSX maintains a full list of the listed ILS here, which includes the two specialist exchange trade fund classes (which are actually the share classes of the CATCo Reinsurance Opportunities Fund) so slightly different listings to the typical ILS and cat bonds we cover on Artemis. More details on CATCo Investment Management and their fund can be found in this recent article.

To give you an idea of how quickly the BSX has achieved this growth: we wrote in July 2010 when the BSX cleared $1 billion in listed cat bonds, again in April 2011 when they hit $1.8 billion and then again in September 2011 when they cleared $2 billion.

Details of the cat bonds and ILS listed on the BSX along with their size can be found in the table below. The links for each deal will take you through to further details in our Deal Directory. The most recently issued transactions are at the top and we include the CATCo funds share classes for completeness and to tally with the BSX’s total.

Issuer Cedent Risks / Perils covered Size
Tramline Re Ltd. (Series 2011-1) Amlin AG U.S. hurricane, U.S. earthquake, European windstorm $150m
Golden State Re Ltd. (Series 2011-1) California State Compensation Insurance Fund Workers compensation claims resulting from California earthquakes $200m
Compass Re Ltd. (Series 2011-1) National Union Fire Insurance Co. of Pittsburgh U.S. hurricane, U.S. earthquake $575m
Queen Street IV Capital Ltd. Munich Re U.S hurricane, European windstorm $100m
Embarcadero Re Ltd. (Series 2011-1) California Earthquake Authority California earthquake $150m
Queen Street III Capital Ltd. Munich Re European windstorm $150m
Queen Street II Capital Ltd. Munich Re U.S. hurricane, European windstorm $100m
Montana Re Ltd. (Series 2010-1) Flagstone Re U.S. hurricane, U.S. earthquake, European windstorm, Japan typhoon, Japan earthquake $210m
Lodestone Re Ltd. (Series 2010-2) Chartis U.S. hurricane, U.S. earthquake $450m
Lodestone Re Ltd. (Series 2010-1) Chartis U.S. hurricane, U.S. earthquake $425m
Merna Reinsurance II Ltd. State Farm U.S. earthquake $350m
Montana Re Ltd. (Series 2009-1) Flagstone Re U.S. hurricane, U.S. Earthquake $175m

Total catastrophe bonds and insurance-linked securities: $3.035 billion

CATCo Reinsurance Opportunities Fund – Ordinary Shares $87m
CATCo Reinsurance Opportunities Fund – Class C Shares $251m

Total CATCo Reinsurance Opportunities Fund share classes: $338m

Total insurance-linked listings on the BSX currently: $3.373 billion

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