The collateralized reinsurance sidecar vehicle of reinsurer Oxbridge Re Ltd. has been completely wiped out by catastrophe loss events from 2018, with the California wildfires tipping it over the edge.
The firm’s Oxbridge NS Re sidecar was licensed around the middle of 2018 and then successfully issued a $2 million tranche Series 2018-1 tranche of Participating Notes, due June 1st 2021, in a private placement to third-party investors.
It marked the first insurance-linked securities (ILS) vehicle established by Oxbridge Re, involving the deployment of the $2 million of capital into a quota-share reinsurance agreement with Oxbridge Reinsurance Limited.
Cayman Islands domiciled reinsurance firm Oxbridge Re said later in 2018 that the fully collateralized reinsurance sidecar vehicle it launched in 2018, Oxbridge Re NS Ltd., was set to take a portion of its losses from hurricane Michael.
At the time Oxbridge Re said that hurricane Michael losses could cause a roughly 55% loss of principal to the reinsurance sidecar and a few months later the reinsurer warned that there could be some exposure to the California wildfires for the sidecar investors as well.
That meant a roughly $1.1 million loss of principal for investors in the sidecar due to the impacts of hurricane Michael.
We have now learned that the California wildfires did indeed hit the quota share arrangement between the reinsurance sidecar and the reinsurer, and we understand that the wildfires have eroded the rest of the outstanding principal, resulting in the loss of the full $2 million.
After the full-year 2018, losses from Oxbridge Re that were attributed to the sidecar’s investors reached $2 million, so eroding all of the principal from the vehicle’s first issuance.
Hurricane Michael drove $1.1 million of the loss, while aggregated global catastrophe events and in particular the California wildfires drove the rest through an aggregate industry loss warranty (ILW) contract, Oxbridge Re said.
The loss under that ILW drove the additional $900,000 loss of principal for the investors.
Oxbridge Re said that it had underwritten the inward ILW swap at January 1st 2018, getting paid $1 million in order to take on $4 million of risk.
During the year, the aggregated losses from global catastrophe events reached the ILW’s trigger point resulting in the firm having to pay out the $4 million for the ILW claim and then via the quota share agreement with the sidecar the $900k of loss was passed onto the investors.
We understand that the wildfires in California were the main driver for the ILW being triggered.
We’re returning to Singapore for our fourth annual ILS market conference for the Asia region. Please register today to secure the best prices. Super early bird tickets are now almost sold out.