Another MyLotto24 jackpot payout misses the ILS market

by Artemis on March 13, 2017

MyLotto24 has experienced another major jackpot win, but again it has fallen below the level where insurance-linked securities (ILS) investors would have paid a share through the Hoplon II Insurance Ltd. lottery jackpot winning catastrophe bond and collateralised reinsurance cover.

According to MyLotto24 parent group ZEAL Network SE, a jackpot prize of around EUR 15 million was won by a player on one of its secondary lottery games.

At EUR 15 million the jackpot payout didn’t come close to the attachment level of the Hoplon II jackpot winnings cat bond, as the lower risk of two tranches of notes attaches at EUR 60 million of losses to MyLotto24.

The Hoplon II jackpot bond provides MyLotto24 with EUR 50 million of insurance cover for large lottery jackpot winning and tax shortfall risks, backed by the capital markets and ILS investors.

MyLotto24 sponsored the deal in 2014, with two tranches of insurance-linked notes issued by Hoplon II Insurance and an additional collateralized reinsurance layer placed at the same time to extend the protection.

Two tranches of Hoplon II notes cover jackpot losses from an attachment of EUR 60 million up to an exhaustion of EUR 110 million, while the collateralized reinsurance layer, which Hoplon II Insurance entered into privately alongside the ILS, covers losses below the two tranches of notes, from EUR 35 million to EUR 60 million of losses.

In the case of this  EUR 15 million jackpot win, none of the collateralised coverage has come into play for MyLotto24 and the company has retained the full loss.

ZEAL explained that; “The pay-out amount falls within the self-retention specified in MyLotto24’s hedging instruments,” adding that its fiscal year 2017 operating performance would be impacted by the EUR 15 million full loss.

In 2016 MyLotto24 suffered a €37m jackpot win in a secondary lottery it held, but that too did not hit the collateralised reinsurance layer, instead the lottery company managed to recoup some of the loss through a special risk insurance policy it had.

Another lottery linked ILS transaction did experience a payout in 2016, when the Lottoland Group, a Gibraltar licensed online lottery provider said that a €14m lottery jackpot win had resulted in a payout from its collateralised reinsurance based ILS transaction.

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