Jardine Lloyd Thompson Capital Markets (JLTCM) Inc. has arranged a $10m private catastrophe bond, Market Re Ltd. (Series 2014-1), for an unnamed sponsor using a new issuance vehicle established by JLTCM and partners including Horseshoe Group.
The Market Re 2014-1 cat bond is a $10m privately placed catastrophe bond, which provides the unnamed sponsor with two years of fully-collateralized catastrophe reinsurance protection on an indemnity basis for losses from named storms affecting its Florida book of business.
The Market Re 2014-1 cat bond is the first issuance through a new vehicle established by JLTCM alongside partners including Bermuda-headquartered ILS management and transformation specialist Horseshoe Group which aims to make the capital markets more accessible to issuers seeking to offer smaller sized cat bonds.
With this latest development and the launch of a platform to facilitate cheaper and easier issuance of small catastrophe bonds, JLTCM are following their track record of helping new and smaller sponsors to access the capital markets.
“At JLTCM, we remain focused on the democratization of the capital markets so that issuance doesn’t just remain the domain of larger cedants. We are delighted that we have been able to create a more cost‐effective vehicle that will enable cedants to source capital markets capacity for even smaller deals,” commented Rick Miller, Managing Director and Co‐Head of Insurance‐Linked Securities at Jardine Lloyd Thompson Capital Markets.
The first transaction on the Market Re platform follows the form of other privately placed cat bonds that the JLTCM team have arranged, with the modelling being performed by the ILS investment managers rather than a third-party firm to reduce costs.
The Market Re 2014-1 cat bond was well received by investors and the platform will help investors to increase their access to transactions and risks, JLTCM told Artemis.
Miller continued; “For investors, we are confident that Market Re transactions will allow us to continue to bring new cedants and perils to them in a manner that will allow them to diversify their portfolios.”
The Market Re vehicle has been designed to be broker agnostic, JLTCM told Artemis, which is an interesting point to note as despite the firm being brokers they are bringing a new issuance platform offering to the ILS market which other brokers could use for their clients.
Miller told Artemis that JLTCM hope that this will enable smaller insurance and reinsurance brokers to offer capital markets solutions and catastrophe bonds to their clients, in cooperation with JLTCM, even though the brokerage itself does not have the relevant capital market experience.
“We have worked closely with our strategic service partners to build a scalable vehicle that will open up a wide‐range of possibilities for our clients. With the growth of alternative capital and the rise of the reinsurance manager, we wanted to find innovative ways to bring cedants and investors together,” commented Michael Popkin, Managing Director and Co‐Head of Insurance‐Linked Securities at Jardine Lloyd Thompson Capital Markets. “Bringing this first (of many) Market Re transactions required the close coordination among all of the service providers, the cedant, and the investors. It was really a team effort.”
A key partner in the process of creating the Market Re issuance platform and getting this first Market Re private cat bond to market was Horseshoe Group, the Bermuda headquartered ILS specialist manager and transformation services firm.
“The Horseshoe Group is excited to work again with JLTCM to find new and creative ways to bring more opportunities to the ILS markets. Market Re is a natural extension of our growing transformation platform, and we are pleased to have collaborated with JLTCM,” stated Andre Perez, CEO of the Horseshoe Group. “For several years now, we had ILS investors asking for ways to participate in the collateralized reinsurance market via the purchase of tradable notes; they can now do that via Market Re.”
“The Market Re process further reduces the frictional expenses incurred when compared to a 144a placement. The successful launch of Market Re was only possible through the close coordination, support, and partnership from its key service providers who worked hard to make sure the transaction remained efficient given its small size,” Miller explained.
The rise of the private catastrophe bond issuance platform continues, with a number of options now available to those seeking a quicker, lower-friction way to bring risk to the capital markets. Platforms like Market Re also offer investors a chance to originate more of their own risk by placing collateralized reinsurance transactions through the platforms where appropriate. The secondary transferability of these notes is a key draw in leveraging these platforms for issuance over a typical collateralized reinsurance deal.
The Market Re Ltd. special purpose insurance vehicle was registered by the Bermuda Monetary Authority on the 29th April.