LI Re 2016-1 private cat bond issued by Hannover Re via Kaith Re

by Artemis on May 27, 2016

A new $3.75m private catastrophe bond (or cat bond lite) or insurance-linked security (ILS) transaction, LI Re (Series 2016-1), has been issued through German reinsurance firm Hannover Re’s segregated accounts vehicle, Kaith Re Ltd.

Hannover Re has been acting as a private ILS and catastrophe bond facilitator for some years now, with a number of transactions issued through the reinsurance firms Kaith Re Ltd. vehicle. By acting as a transformer and facilitator for private cat bond note issues, through the securitization of segregated cells of its Bermuda segregated accounts insurer Kaith Re, Hannover Re has been augmenting its income with revenue from the ILS market.

As with all of these small, privately transacted and placed cat bonds, we assume that the transaction represents an ILS investors participation in a reinsurance renewal contract, with the risk being securitised in order to meet the investors mandate and needs for a fully securitised ILS note, rather than a collateralised reinsurance contract.

In this latest LI Re private cat bond, LI Re (Series 2016-1), $3.75m of notes have been issued by Kaith Re Ltd., acting on behalf of its segregated account LI Re. This transaction could be a renewal of the also $3.75m LI Re (Series 2015-1) private cat bond deal from last year, but we cannot confirm that.

As with previous LI Re deals, and any private ILS issued through Kaith Re Ltd., this transaction sees German reinsurance firm Hannover Re working on behalf of a cedent and likely a single investor as a transformer and private cat bond service provider, taking a collateralized reinsurance contract and securitizing it through Kaith Re, to issue the $3.75m 2016-1 series of LI Re notes.

The notes issued in this private cat bond (or cat bond lite) deal have a due date of 31st May 2017, suggesting it is a June renewal transaction. As with all the other LI Re private cat bonds we assume that these cover property catastrophe risks, possibly U.S. given the time of year as close to the key renewals and given the focus on those perils among ILS investors, but details of the exact nature of this transaction are unavailable.

The $3.75m of LI Re Series 2016-1 notes have been listed on the Bermuda Stock Exchange (BSX) as Section V – Insurance Related Securities.

Hannover Re again demonstrates its continued desire to service the insurance-linked securities (ILS) market, acting as a facilitator and intermediary to aid smaller reinsurance cedents and investors to transform risks into liquid, securitized catastrophe bond form.

This LI Re (Series 2016-1) private cat bond has been added to the Artemis Deal Directory, however it will not be fully included in all of our catastrophe bond and ILS market statistics due to the lack of available information.

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