RenRe extends maturity on $3.3m of Fibonacci Re ILS notes

by Artemis on January 4, 2018

Bermudian reinsurance firm RenaissanceRe has allowed a partial redemption of its $140 million Series 2017-1 notes issued by Fibonacci Reinsurance Ltd. at the scheduled maturity, but has opted to extend the maturity for $3.3 million of the tranche, suggesting the vehicle may be exposed to losses from recent catastrophe events.

Fibonacci Reinsurance Ltd. is RenaissanceRe’s sidecar-like structure that provides investors and fund’s the reinsurer manages with catastrophe bond-like investments in property catastrophe and non-natural peril risks.

The first issuance from Fibonacci Re was completed for the January 2017 renewals, when the sidecar-like vehicle issued a $140 million tranche of Series 2017-1 Class A participating ILS notes.

The $140 million tranche was scheduled to be on-risk for a year, with its maturity scheduled for January 10th 2018.

However, RenaissanceRe has opted to allow a partial redemption, returning the majority of the notes principal to investors, but has extended the maturity on a small slice of the 2017-1 Class A Fibonacci Re issuance, which could be a retention of collateral to allow for loss development to occur.

The issuance vehicle, Bermuda domiciled special purpose insurer Fibonacci Reinsurance Ltd., has announced the redemption of $136.7 million of the $140 million tranche, and the extension of maturity for the remaining $3.3 million of 2017-1 Class A outstanding notes to the 10th April 2018.

Redemption typically means that an investors principal investment in a security has been returned, so the redemption of the $136.7 million of notes likely means that this amount has been returned to the investors in the Fibonacci Re 2017-1 Class A notes.

But the extension of maturity for the remaining $3.3 million most probably suggests some losses to pay, or developing losses, so the collateral is retained which could mean that this small slice of the Fibonacci Re issuance is destined to not be returned to the vehicles investors.

It’s impossible to be certain on the fate of these $3.3 million of notes, but exposure to the major catastrophe loss events of 2017 seems the most likely reason for this extension.

There is another $45 million Class B tranche of Series 2017-1 notes from Fibonacci Reinsurance, but these are not scheduled for maturity until June 8th 2018, so we may not understand whether this tranche was exposed to the catastrophes until later this year.

For more details on reinsurance sidecar transactions and investments view our list of collateralized reinsurance sidecars.

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