Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Dodeka III

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Dodeka III – At a glance:

  • Issuer: Dodeka III
  • Cedent / sponsor: Unknown
  • Placement / structuring agent/s: ?
  • Risk modelling / calculation agents etc: ?
  • Risks / perils covered: U.S. multi-peril
  • Size: $10m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Aug 2014

Dodeka III – Full details:

This is the fourth private catastrophe bond transaction to complete from ILS manager Twelve Capital’s Dodeka series of deals. The numbering convention is out of sync as deal IV completed more quickly than this Dodeka III transaction.

Dodeka III is a zero coupon, including the premium, privately placed catastrophe bond. The Dodeka III deal is just $10m in size and the underlying risk is not from a reinsurance contract, rather it is from an industry loss warranty (ILW) derivative contract which is transformed into a cat bond for Twelve Capital.

Dodeka III provides coverage for U.S. all natural perils, so including risk such as U.S. wind risks, U.S. earthquake, U.S. severe thunderstorms, U.S. winter storms and wildfire.

As the private cat bond has been transformed from an ILW the deal features an industry loss index, with Property Claim Services (PCS) acting as the reporting agency and providing data on industry losses.

The Dodeka III deal has a one year term, having been completed on the 1st August and with coverage running until maturity on the 31st July 2015.

Dodeka III is a third-event cover, meaning that for the deal to be triggered during the term of the cat bond three (or more) qualifying catastrophe events which cause a market loss above a pre-defined level must occur.

This is actually the only third-event catastrophe bond in the outstanding market at this time.

The Dodeka III cat bond will pay an equivalent of a high-single digit return to investors, somewhere between 5% and 10%, which is higher than many recent catastrophe bond issues.

The Dodeka III private catastrophe bond, like the previous three Dodeka deals, was issued through the Kane SAC Limited private cat bond platform, which is operated by global independent insurance manager Kane.

The $10m of Dodeka III private cat bond notes will be listed on the Bermuda Stock exchange, enhancing their liquidity and providing Twelve Capital with improved options and additional transparency to trade the notes on the secondary market. The notes will also be priced by a number of ILS broker desks, giving the market visibility of their pricing and increasing options for liquidity.

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