Swiss Re Insurance-Linked Fund Management

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Market Re Ltd. (Series 2016-5)

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Market Re Ltd. (Series 2016-5) – At a glance:

  • Issuer: Market Re Ltd. (Series 2016-5)
  • Cedent / sponsor: Allianz Risk Transfer
  • Placement / structuring agent/s: Jardine Lloyd Thompson Capital Markets are structuring agent and bookrunner
  • Risk modelling / calculation agents etc: N/A
  • Risks / perils covered: Temperature risks
  • Size: $30.75m
  • Trigger type: Parametric
  • Ratings: NR
  • Date of issue: Sep 2016

Market Re Ltd. (Series 2016-5) – Full details:

With this latest transaction to use the JLTCM Market Re Ltd. private cat bond platform, Allianz Risk Transfer has turned to the ILS unit of the JLT global insurance and reinsurance brokerage team for a $70m cat bond to provide a source of reinsurance cover for European temperature risks from warm winters.

The JLTCM owned Market Re Ltd. special purpose vehicle will seek to issue and sell to investors two tranches of Series 2016-5 notes, with the aim of providing sponsor Allianz Risk Transfer with a source of fully-collateralised reinsurance protection. The protection is set to run for almost three years, across three risk periods, we’re told.

The Market Re 2016-5 issuance involves a $30m tranche of Class A notes and a $40m tranche of Class B notes, with both tranches exposed to the risks of warmer winter temperatures across five key weather measurement points in the continent. The five locations where temperatures will be measured are London, UK; Paris, France; De Bilt, Netherlands; Prague, Czech Republic and Frankfurt, Germany.

Weather data will be collected from these weather stations and used to construct an index, against which the transaction can be triggered and the size of any payouts calculated. As such the notes feature what could be termed either a parametric or weather-index trigger, with both tranches providing aggregate coverage per pre-defined calculation period.

The two tranches will sit on top of each other but will provide cascading protection, with one dropping down to replace the other as it is eroded by aggregate losses, we are told. Essentially the notes will only be on risk during the winter months, as they are designed to provide reinsurance cover for exposure to warmer winter temperatures.

We’re told that the $30m of Market Re 2016-5 Class A notes are the least risky, and this is reflected in price guidance of 4.5% to 6% for the tranche. Meanwhile, the Class B notes that sit beneath are being offered with price guidance of 13% to 15%, reflecting a higher level of risk.

Update 1:

Jardine Lloyd Thompson Capital Markets (JLTCM) ILS structuring and issuance team has successfully closed the ground-breaking temperature-linked weather catastrophe bond Market Re Ltd. (Series 2016-5), securing $30.75m of coverage against European winter temperature extremes for the sponsor.

>The transaction downsized during its marketing phase, as one tranche was dropped, but what’s most important about this transaction is that it completed and could open up the cat bond market to greater securitisation of weather risks.

The completed privately placed catastrophe bond, Market 2016-5 provides $30.75 million of single year parametric-based collateralized retrocession coverage for warm-weather winters across Europe in one tranche of notes.

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