Oxbridge Re’s sidecar faces 55% loss of principal from hurricane Michael

Cayman Islands domiciled reinsurance firm Oxbridge Re Ltd. has said that its fully collateralized reinsurance sidecar vehicle Oxbridge Re NS Ltd. is likely to take a portion of the firms losses from recent hurricane Michael, which could amount to a roughly 55% loss of principal.

In announcing its quarterly results yesterday, Oxbridge Re said that hurricane Michael is likely to have caused significant losses across the insurance industry and as a result the firm has taken its share.

Oxbridge Re expects to suffer a net loss to its capital and earnings of roughly $3.1 million from hurricane Michael, but that is after taking into consideration the quota-share arrangement it benefits from through the Oxbridge Re NS reinsurance sidecar.

As a result of the statement and given the $3.1 million is the net loss Oxbridge Re expects, the quota share arrangement between the reinsurer and the sidecar will have seen a portion of the losses flowing to the third-party investors who back the vehicle.

The Oxbridge NS Re sidecar was licensed at the middle of this year and then successfully issued a Series 2018-1 tranche of Participating Notes, due June 1st 2021, in a private placement.

This issuance only involved an initial capital deployment of $2 million into a quota-share reinsurance agreement with Oxbridge Reinsurance Limited, thanks to the backing of third-party investors.

It now transpires that hurricane Michael has caused investors in the sidecar, so the Series 2018-1 noteholders, to suffer a loss of principal of around $1.1 million due to hurricane Michael and a loss of income of $232,000, the company said.

While relatively small in dollar and reinsurance sidecar terms, the support provided by the sidecar vehicle is a meaningful percentage share of the losses Oxbridge Re has suffered from hurricane Michael, demonstrating the value of having the vehicle and support of the capital markets in place for this year’s hurricane season.