Anima Re ViF life deal completed as private placement by Atlanticlux

FWU Group subsidiary and Luxembourg based life insurance company Atlanticlux has completed its proposed Anima Re value in force (ViF) life insurance linked securitisation deal through a private placement, foregoing the need for the deal to be rated.

Yesterday, rating agency Fitch reported that it was withdrawing the preliminary rating that it gave to the ViF notes that Anima Re, an incorporated cell of Guernsey-based cell company Anima Re ICC Limited was set to issue.

Fitch said that the withdrawal of the preliminary rating reflects the fact that the €55 million value of business-in-force securitisation has been completed via a private placement. Hence the rating becomes less important to the investor, often a sole provider of third-party capital when a deal is privately placed at this size.

The structure of the deal sees Atlanticlux leveraging third-party reinsurance capital to offload certain French and German life insurance policyholder lapse risks, while the deal was also designed to allow the insurer to transfer certain French and German mortality risks to a traditional reinsurer through a retrocession contract via the Anima Re vehicle.

More details from our previous article on this transaction:

The cell, Anima Re, acts as a transformer vehicle for this transaction, entering into a reinsurance contract with Atlanticlux.

This reinsurance contract will see Atlanticlux cede one-third of the remaining mortality risk of a German block of life insurance policies and around 55% of the remaining mortality risk of a French block of life policies to Anima Re as well as part of the lapse risk from a designated block of existing French and German life insurance policies.

At the same time, Anima Re will enter into a retrocessional reinsurance agreement with reinsurer Partner Reinsurance Europe Ltd. for all of the mortality risk in the portfolio, meaning that Anima Re itself will only be left with the life insurance policyholder lapse risk.

The proceeds from this transaction will be used by Atlanticlux to pay back existing financing of acquisition costs covered by a factoring agreement with its parent FWU AG as well as to finance market development activities together with FWU AG. The proceeds will also likely be used to collateralise the Anima Re cell as well.

It’s not that surprising that if there was just a sole investor backing this deal that it has been transacted privately. The need for a rating seems unimportant if just one investor planned to hold the deal.

Lack of a rating does not stop secondary transfer of insurance-linked securities (ILS) notes either, meaning that the rating is often forgone in many catastrophe bond deals now as well. It’s a step in the ILS issuance process which is deemed less important than a few years ago.