Kane launches private cat bond platform, issues first series of notes

Kane, the global independent insurance manager, has launched a private catastrophe bond issuance platform and a first series of notes has been issued. The private catastrophe bond notes have been issued through the Kane SAC Limited Note Program, a platform Kane has established to assist private ILS sponsors.

Kane SAC Limited (Kane SAC), a subsidiary of Kane, today announced the issuance of US$9,523,770 Series 1-2013 Notes and the launch of the Kane SAC Limited Note Program, its new independent private catastrophe bond platform.

The ability to issue catastrophe bond and insurance-linked security notes quickly and cost-effectively has been a goal of many sponsors and market facilitator’s making private cat bond platforms a hot topic for the last couple of years.

Some of the private cat bond and ILS facilities which have launched have not yet seen any issuance, but Kane now has a platform as well as a proof of concept series of notes, which have been issued and sold to investors, and this should help to build interest. Kane now joins those offering a way for sponsors to leverage its facilities to issue private cat bonds or ILS.

The first issuance from the platform of $9,523,770 Series 1-2013 have been listed on the Bermuda Stock Exchange as well, making this the first issuance of ILS notes by a segregated account company to be listed on the BSX.

Kane SAC is a Bermuda exempted company registered as a Class 3 insurer and as a Class C insurer under the Insurance Act 1978 (as amended) and as a segregated accounts company registered under the Segregated Accounts Companies Act 2000 (as amended).

Robert Eastham, Managing Director, Kane (Bermuda) Limited, commented on the announcement; “We are delighted to be able to launch our new catastrophe bond platform by announcing the issuance of the Series 1-2013 Notes. Our decision to list the notes on the BSX was due to investor demand and means that they are now available in a tradable format, which we feel will significantly heighten their overall value to the investment community.”

With investor demand for ILS and cat bond investments at an all time high, private cat bond and ILS issuance facilities have the potential to become a key part of the growing market. These ILS issuance facilities can help smaller sponsors to reach the market, make smaller transactions more cost-effective and allow sponsors to test investor appetite with new perils and structures.

The use of private ILS issuance facilities could also allow investors to source their own ILS investments by transforming collateralized reinsurance contracts using the facilities, this could become a very useful tool for investors in need of diversification and with a mandate to invest in notes and securities.

“Moving forward, we see this platform playing a key role in facilitating the flow of smaller transactions into the collateralized reinsurance sector. Our goal is to reduce both time to market and structuring costs by providing a very standardized and efficient means for investors to access the reinsurance markets”, continued Eastham.

Greg Wojciechowski, President and CEO of the BSX commented on the issuance and listing; “We are delighted to welcome the Kane SAC Limited Note Program to listing on the BSX. This vehicle joins a prestigious list of almost 60 insurance linked securities that have chosen the BSX as their listing venue of choice. The Kane SAC Limited Note Program is the first structure of its kind to list on the
BSX and underscores the innovative nature of the Bermuda market and how it is evolving to adapt to the needs of its clients. We wish Kane every success with this new program.”

Brad Adderley, Partner, Appleby (Bermuda) Limited, who provided legal advice on the structure, added; “It has been a distinct pleasure to work with Kane on the introduction of the Kane SAC Limited Note Program, which is an important innovation for the ILS market and Appleby is pleased to have played a key role in the structuring and BSX approval process.”

Adderley also told us that he sees a strong future for this private cat bond platform and ILS issuance in general; “The structure is the first of its kind in Bermuda and demonstrates Kane’s forward thinking nature and the changing landscape of the insurance market. We have seen a steady increase in both transaction numbers and in the value invested in insurance linked securities (ILS) like cat bonds. The low interest rate environment has affected the profitability of traditional reinsurers and that has driven those reinsurers to the ILS market to seek other solutions to leverage capital. Further, one of the most attractive points of ILS to investors in cat bonds and other ILS tools, is that these investments are uncorrelated to the stock market, thus providing portfolio diversification. Kane has been a long standing client and we wish them continued success.”