Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Market Re Ltd. (Series 2014-4)

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Market Re Ltd. (Series 2014-4) – At a glance:

  • Issuer: Market Re Ltd. (Series 2014-4)
  • Cedent / sponsor: Unknown
  • Placement / structuring agent/s: Jardine Lloyd Thompson Capital Markets are structuring agent and bookrunner
  • Risk modelling / calculation agents etc: ?
  • Risks / perils covered: U.S. earthquake
  • Size: $30m
  • Trigger type: Parametric
  • Ratings: NA
  • Date of issue: Jul 2014

Market Re Ltd. (Series 2014-4) – Full details:

The Market Re 2014-4 transaction sees a new peril and new trigger being issued through the Market Re platform. The Series 2014-4 deal features two tranches of notes, a Class A tranche of $22m and a Class B trance at $8m, being issued.

The $30m of notes combined will provide the unnamed sponsor with a two-year source of fully-collateralized reinsurance cover for North American earthquake risks.

The Market Re 2014-4 cat bond features a parametric trigger, the first such trigger under the new platform. Cover from the cat bond notes is on a per-occurrence basis.

“We continue to see the momentum of deals increasing. Both cedants and investors are recognizing the opportunity and value of transacting via cat bonds,” said Michael Popkin, Managing Director and Co-Head of Insurance-Linked Securities at Jardine Lloyd Thompson Capital Markets. “With each transaction, we are expanding the number of investors who are familiar with the Market Re platform.”

“Market Re allows us to customize risk transfer for our clients and then convert these into cat bonds in a scalable way that makes it efficient for cedants and investors alike,” added Rick Miller, Managing Director and Co-Head of Insurance-Linked Securities at Jardine Lloyd Thompson Capital Markets. “The Market Re transactions are definitely enabling us to open up the cat bond market to more cedants.”

The cedant in this case requested the tranches approach to the cat bond, so resulting in the issuance of both Class A and Class B notes. Both tranches are identical in every way except for size, but this is how the cedant requested it which we would assume is to better fit within their overall reinsurance programme tower. Both tranches of notes will pay investors a coupon of 4%, according to JLTCM.

Another factor with Market Re which the sponsors of cat bonds are appreciating is the anonymity, according to JLTCM. “Market Re allows for a cedant to remain anonymous, which is the case here. This is one of the other advantages of Market Re, which cedants are finding valuable,” said Michael Popkin.

Also of note is the fact that the cedant funded the interest upfront, so ensuring the payment will always be there for investors and removing any question of credit risk.

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