RenRe’s Fibonacci Reinsurance vehicle in $70m note issuance

by Artemis on February 12, 2018

Fibonacci Reinsurance Ltd., a sidecar-like vehicle that provides investors with catastrophe bond like notes operated by Bermudian reinsurer RenaissanceRe, has issued a new $70 million tranche of insurance-linked notes in a Series 2018-1 transaction.

RenaissanceRe launched the Fibonacci Re vehicle at the start of 2017, with a $140 million initial issuance of Series 2017-1 participating notes.

That was followed up with another $45 million tranche of Series 2017-2 Class A participating notes in June 2017, as RenRe put the vehicle to work during the mid-year reinsurance renewals as well.

The $140 million of Fibonacci Re Series 2017-1 notes were largely allowed to mature in January, but RenRe opted to extend maturity on $3.3 million of notes from that January 2017 issue, suggesting that the series of ILS notes faced some losses from 2017 hurricanes or other catastrophe events.

Now, RenRe has arranged a fresh issuance of notes from Fibonacci Re, which has been designed to satisfy the needs of its own investment portfolios, as well as a number of third-party investors, we understand.

This new issuance saw Fibonacci Reinsurance Ltd. issuing a $70 million tranche of Series 2018-1 Class A participating notes, with the notes all placed with qualifying investors.

As we said, RenaissanceRe tends to allocate some of the Fibonacci Re issuances to itself, as they fit its cat bond mandates and are an effective way for the reinsurance firm to source new risks in an efficient manner for its own funds. Hence RenRe’s other fund mandates, such as Medici, could be one of the investors benefiting from this transaction.

The $70 million of Series 2018-1 notes issued by Fibonacci Re are exposed to property catastrophe risks, we’re told, and have a due-date of January 10th 2019, so represent a one-year property catastrophe reinsurance or retrocession contract.

The notes have been admitted for listing on the Bermuda Stock Exchange (BSX), classified as Insurance Related Securities.

The Fibonacci Re vehicle is designed to have a flexible structure, allowing RenRe to optimise its portfolio to make use of it when it chooses or investor demand allows.

RenRe uses Fibonacci Re to securitise reinsurance contracts into a form that can both to supply its own catastrophe bond fund mandate and satisfy the demand of other third-party ILS investors who are seeking catastrophe bond style investment opportunities.

Whether catastrophe bonds or a collateralized reinsurance sidecar issuing notes, the end result is a securitized investment product with the return based on underlying catastrophic reinsurance risks.

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