Terra Brasis Re and AlphaCat private catastrophe bond renewed for 2018

by Artemis on January 16, 2018

The private catastrophe bond sponsored by Latin American reinsurance firm Terra Brasis Re and underwritten as well as invested in by AlphaCat Managers, the insurance and reinsurance linked investment unit of Validus Group, has been renewed for 2018, in a $5 million Alpha Terra Validus II transaction.

Last year the first Alpha Terra Validus private cat bond was issued, which saw AlphaCat Managers sourcing risks from cedent Brazilian headquartered reinsurance firm Terra Brasis Resseguros S.A. (Terra Brasis Re)., which were then transformed into ILS notes for the managers funds to invest in.

The Alpha Terra Validus I private cat bond was a very rare securitisation of Latin American property catastrophe risks, which we understand to have been multi-country earthquake risk.

So it’s encouraging to see that the arrangement has been renewed and with the first transaction having matured in recent days and replacement has already appeared.

The renewal transaction has again been issued through the Aon Insurance Managers owned White Rock Insurance (SAC) Ltd. Class 3, Class C and segregated accounts reinsurance company.

The reinsurance vehicle, acting on behalf of a segregated account named Alpha Terra Validus II, has issued $5 million of Alpha Terra Validus II principal at-risk zero coupon notes, which will be due for maturity on the 15th January 2019. The notes have been listed on the Bermuda Stock Exchange (BSX) and placed with qualifying investors, which will have been funds managed by AlphaCat.

The $5 million of notes provide retrocessional reinsurance protection to Terra Brasis Re, for certain Latin American property catastrophe risks, likely earthquake exposures we understand. We also understand that this is an indemnity triggered private cat bond.

Being a zero coupon note arrangement, the Alpha Terra Validus II private cat bond will have seen the cedent funding the premium upfront, which offers a kind of leverage to the investor, like collateralized reinsurance arrangements.

It’s encouraging to see Terra Brasis Re returning to renew its catastrophe bond arrangement with the help of AlphaCat Managers and it is to be hoped that small, private arrangements such as this will begin to stimulate greater interest in insurance linked securities (ILS) in Latin America.

We’ve listed the $5 million Alpha Terra Validus II private catastrophe bond in the Artemis Deal Directory and the limited detail we have will be included in our catastrophe bond and ILS market statistics.

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