Twelve Capital adds portfolio diversification with latest Dodeka cat bond

by Artemis on January 10, 2018

Insurance and reinsurance focused investment manager Twelve Capital said that its latest privately transacted catastrophe bond, the almost $35 million Dodeka XIV deal, that we covered at the time of its listing at the start of the month, features perils not typically accessible in the main cat bond market and so adds diversification to its portfolio.

The latest Dodeka private cat bond is the fifteenth such deal in the Dodeka series from ILS investment fund manager Twelve Capital, as it seeks additional securitised catastrophe linked assets for its fund portfolios.

As with all the other Dodeka cat bonds, the notes are available for investment only by Twelve Capital fund strategies, giving the manager a new way to source additional risk that meets its cat bond fund mandates.

The Dodeka XIV transaction covers second event U.S. all natural perils risks, which the manager notes is not a peril that is securitised in catastrophe bond format, with cat bonds typically being first event per-occurrence or annual aggregate in nature.

Hence the Dodeka XIV cat bond offers a new diversifier for the Twelve Capital cat bond fund, helping to increase the overall portfolio diversification.

Sandro Kriesch, Managing Partner and Head of ILS at Twelve Capital, explained, “The Dodeka programme allows our cat bond funds to invest into perils that are not readily available in securities format, resulting in improved portfolio diversification, or into transactions exhibiting more attractive economic terms.”

The transaction is also another way that Twelve Capital can capitalise on the current higher rates in reinsurance and retrocession. Being a second event, all natural perils bond, it is safe to assume that this utilises an industry loss trigger and hence is most probably a transformed ILW contract providing retrocession to a ceding company.

“Especially in the aftermath of the recent hurricanes, the Dodeka programme allows Twelve Capital’s investors to benefit from the current increases in premiums across collateralised reinsurance and retrocession markets,” Kriesch said.

Sourcing specific risk investment opportunities, transforming them using a segregated accounts reinsurance vehicle and then issuing private cat bond securities for investment, is an effective way to add diversity to a cat bond portfolio and to be able to access more niche opportunities, where the risk return profile may be more attractive as well.

Twelve Capital said that it will, “Continue to securitise private ILS content under its proprietary Dodeka programme if it fits the profile and investment needs of its cat bond funds and mandates.”

Twelve Capital Management has approximately $1.6 billion of ILS under management, but a total of $4.5 billion including its strategies to invest along the reinsurance return spectrum from private insurance debt, to private equity and ILS.

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