Artex SAC Limited – Aquarelle Notes

This is the latest private catastrophe bond, or private issuance of insurance-linked securities (ILS), from Artex’s segregated account company, Artex SAC Limited.

At the time, based on the limited information available, this was the joint-largest private cat bond issuance we’d ever recorded in our Deal Directory.

The transaction has come to market through the Artex Risk Solutions owned segregated account reinsurance transformer platform, Artex SAC Limited.

It’s the first transaction from the Artex SAC (segregated accounts company) platform of 2021 and, at $250 million, far larger than anything else we’ve seen transacted through the vehicle.

Artex’s SAC Limited vehicle is based in Bermuda and facilitates private cat bond transactions, acting as a transformer for the risks and a securitization vehicle to issue notes to be sold to either individual or groups of investors, depending on whether a transaction is syndicated or bilateral in nature.

This Aquarelle private cat bond issuance has been completed and listed in Bermuda using the vehicle’s Artex SAC Limited ILS Note Program II.

The transaction saw Artex SAC Limited acting for the Segregated Account Series named “Aquarelle” to issue two tranches of notes that have been placed with qualified institutional investors or insurance-linked securities (ILS) funds.

Sometimes these private placement cat bond deals can be bilateral, between a ceding company and single investor. But being $250 million in size it would make sense for the deal to have been privately placed with a group or club of investors and funds.

Artex SAC Limited has issued a $50 million tranche of Series 2021 Class A principal-at-risk Aquarelle notes and a $200 million tranche of Series 2021 Class B principal-at-risk notes, we understand.

The notes, which have been admitted to listing on the Bermuda Stock Exchange (BSX), all have maturity due at December 20th 2023, suggesting they could cover two US wind seasons perhaps, or a year and a half for another peril.

As ever, make the assumption that a private cat bond or ILS issuance like this features notes linked to certain property catastrophe risks, most likely representing a securitisation of either an indemnity or industry loss triggered collateralised reinsurance or retrocession transaction.

Update – March 2022:

The ceding insurer that sponsored this Aquarelle private catastrophe bond opted to use the variable reset feature of the terms.

The $50 million Class A tranche of notes issued by Artex SAC in respect of the Aquarelle segregated account have had their risk metrics updated so as the attachment point is now $1.39 billion, the exhaustion point is $1.835 billion, the modelled annual expected loss is 9.2% and the updated interest spread is 15.75%.

The $200 million Class B tranche of Aquarelle notes issued by Artex SAC have had their risk metrics updated so as the attachment point is now $2.98 billion, the exhaustion point is $4.208 billion, the modelled annual expected loss is 4.14% and the updated interest spread is 9.16%.

We understand this variable reset was actually effective as of December 13th 2021.

Update – December 2023:

We’ve learned that the $200 million Class B tranche of Aquarelle cat bond notes has been allowed to mature on schedule and been redeemed in full by investors.

But the $50 million Class A tranche of notes had their maturity date extended out to March 20th 2024, presumably to allow for continued development of potentially covered losses.

Update – Jun 2024:

The Class A notes had their maturity date extended again, with it now set for September 27th 2025.