Platinum Underwriters Holdings, a Bermuda based provider of property, casualty and finite risk reinsurance coverages to a global client base, has said that it chose not to issue any catastrophe bonds since its 2008 Topiary Capital transaction matured. It has however tapped alternative reinsurance capacity this year.
Platinum has only issued one cat bond and it appears that it has not been seduced by the lower pricing available in the ILS market this year to repeat that deal. Instead, the reinsurer has been closely watching the developments in the alternative reinsurance market, as third-party capital makes its presence felt, and selected to use non-traditional capacity as a portion of its retrocessional reinsurance protection for 2013.
Platinum CEO Michael Price commented on the reinsurers second-quarter earnings call on the 18th July; “Internally, we have not chosen to issue CAT bonds since the topiary bond that we originally sponsored ran its course. We have been monitoring the availability of nontraditional capacity in all of its forms.”
Platinum has tapped the non-traditional reinsurance market for a retrocessional reinsurance contract this year. On the 1st July it completed a $50m aggregate catastrophe protection which covers it for U.S. all natural perils, Caribbean hurricane and earthquakes in Canada.
CEO Price said that this new cover is now reflected within the reinsurers probable-maximum-loss (PML) calculations and added that the retro cover; “Protects our portfolio from losses at less frequent return periods.” The protection from this contract runs through the end of the year, according to Price.
On the source of the capacity for this $50m aggregate protection, Price explained; “It happens to be from what I would consider to be a nontraditional source at pricing that we think works well given the dynamics of our inwards portfolio.”
So, it’s likely that this is a collateralized retrocessional reinsurance contract, or possibly an industry loss warranty (ILW) type contract, that Platinum has purchased from the alternative or third-party capital backed reinsurance sector. While it has decided against issuing catastrophe bonds it is not surprising to see Platinum find this non-traditional reinsurance protection cost-effective at this time.