Southern Oak returns for $45.26m Oak Leaf Re 2018-1 cat bond

by Artemis on June 27, 2018

Regular catastrophe bond sponsor Southern Oak Insurance Company has returned to the capital markets with a $45.26 million Oak Leaf Re Ltd. (Series 2018-1) transaction, the insurers eighth visit to the cat bond market with the assistance of the Jardine Lloyd Thompson Capital Markets (JLTCM) team.

Southern Oak has become one of the most regular sponsors of cat bonds in the market, having sponsored a new transaction each year since 2011.

All of the Oak Leaf Re cat bonds are marketed on a semi-private basis to investors who undertake their own risk modelling on the deals, making the issuance process efficient and with Jardine Lloyd Thompson Capital Markets (JLTCM) acting as both structuring agent and bookrunner.

This new Oak Leaf Re cat bond follows the triggering of the Oak Leaf Re 2017-1 transaction, after Southern Oak’s losses from hurricane Irma triggered that transaction.

The payout was not particularly significant and it’s encouraging to see Southern Oak returning to the cat bond market so quickly, although this 2018 Oak Leaf Re deal is slightly smaller than the $54 million Oak Leaf Re Ltd. (Series 2017-1).

This new eighth transaction saw JLTCM helping Southern Oak to $45.26 million of fully-collateralized reinsurance protection, through an Oak Leaf Re 2018-1 issuance that featured four tranches of notes which were privately placed and sold to ILS funds and investors.

This Oak Leaf Re 2018-1 privately placed cat bond will provide sponsor Southern Oak with a one year ultimate net loss and indemnity trigger source of collateralized reinsurance protection, providing it with coverage of its book of insurance business against named storms.

The Oak Leaf Re 2018-1 cat bond is split into four classes of notes, including a multi-section tranche that provides both severity and frequency protection, as well as a tranche providing reinstatement premium protection (RPP).

The bond has been issued with a one-year maturity, and can be extended up to 24 months to allow for development of any losses.

“The Oak Leaf Re series continues to be very successful and provides significant value to all parties,” said Michael Popkin, Managing Director and Co-Head of Insurance-Linked Securities at Jardine Lloyd Thompson Capital Markets.

“The Oak Leaf Re cat bond, the eighth one, remains one of a handful of consistent issuers,” added Rick Miller, Managing Director and Co-Head of Insurance-Linked Securities at Jardine Lloyd Thompson Capital Markets.

Ed Hochberg, CEO of JLT Re (North America) Inc. and JLTCM, commented that “our clients and brokers see the capital markets as an integral part of reinsurance programs. JLT Re’s integrated platform allows for smooth execution for our clients.”

The Oak Leaf Re cat bonds began in 2011, with the $11.1m Oak Leaf Re Ltd. (Series 2011-1), followed by the $22.78m Oak Leaf Re Ltd. (Series 2012-1), the $30,49m Oak Leaf Re Ltd. (Series 2013-1), the $44.035m Oak Leaf Re Ltd. (Series 2014-1), the $53.03m Oak Leaf Re Ltd. (Series 2015-1), the $53.575m Oak Leaf Re Ltd. (Series 2016-1) and the most recent and loss affected $54 million Oak Leaf Re Ltd. (Series 2017-1).

As a cedent, Southern Oak Insurance has demonstrated its desire to cultivate relationships with ILS investors over now seven annual issuances, with each cat bond deal bigger than the last.

We’ve added the $45.26 million Oak Leaf Re Ltd. (Series 2018-1) private placement catastrophe bond to the Artemis Deal Directory.

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