Hotaru – Full details:
Shima Reinsurance Ltd. (Shima Re), acting on behalf of its segregated account named Hotaru, has issued approximately $47.67m of securities which are due 7th August 2017, so likely represent an underlying two-year duration reinsurance contract.
Interestingly, the securities issued by Shima Re on behalf of the Hotaru segregated account are Japanese Yen denominated. The JPY 5,850,000,000 of notes convert to approximately $47.67m at today’s exchange rate.
The transaction that these securitised cat bond notes represent is likely a July reinsurance renewal deal, possibly a quota share as is often the way with private ILS transactions using segregated accounts, with a two-year term.
Being denominated in JPY, the Hotaru private cat bond could benefit a Japanese sponsor, perhaps Tokio Millennium Re or even its parent Tokio Marine Group. Alternatively it could be for a Japanese investor, or perhaps an ILS manager with a Japanese denominated insurance-linked investment fund. It’s impossible to confirm at this time.
A previous transaction from Shima Re, the $25m Omamori private cat bond from January 2014, was sponsored by Tokio Millennium Re AG itself, so it will be interesting to see whether Hotaru serves a similar purpose or not.
The Tokio Tensai™ cat bond issuance platform was set up by Tokio Solution Management Ltd. in cooperation with reinsurance broker Guy Carpenter’s capital markets and cat bond specialist team GC Securities in 2013. We can’t confirm the brokers involvement in this Hotaru deal at this time, but it would seem likely given its cooperation on the Tensai platform.
We now know that the underlying risk for the Hotaru private cat bond was Japanese earthquake exposures.
Tokio Millennium Re AG, Bermuda branch, acted as a fronting entity so the risk was ceded by it to Shima Re.
Tokio Solution Management facilitated the transaction and acts as insurance manager of Shima Reinsurance Ltd.
Appleby Securities (Bermuda) Limited acted as listing sponsor.