Swiss Re Insurance-Linked Fund Management

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Oak Leaf Re Ltd. (Series 2014-1)

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Oak Leaf Re Ltd. (Series 2014-1) – At a glance:

  • Issuer: Oak Leaf Re Ltd. (Series 2014-1)
  • Cedent / sponsor: Southern Oak Insurance Company
  • Placement / structuring agent/s: Jardine Lloyd Thompson Capital Markets are structuring agent and bookrunner
  • Risk modelling / calculation agents etc: Participating investors undertook their own risk modelling
  • Risks / perils covered: Florida named storms
  • Size: $44.035m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jun 2014

Oak Leaf Re Ltd. (Series 2014-1) – Full details:

This is the fourth Oak Leaf Re private cat bond that the Jardine Lloyd Thompson Capital Markets (JLTCM) Inc. team, part of reinsurance broker JLT Towers Re, has arranged and placed for this unnamed Florida homeowners specialty insurance company sponsor and the largest Oak Leaf cat bond to date. As with the previous Oak Leaf cat bond deals, the Series 2014-1 transaction is being issued through Oak Leaf Re Ltd., a Bermuda domiciled special purpose insurer.

The JLTCM team arranged the first $11.95m private placement of cat bond notes through the Oak Leaf Re 2011-1 transaction, then helped the sponsor double the cover it secured from the cat bond market with Oak Leaf Re 2012-1 coming in at $22.78m, before growing the deal again to $30.49m in 2013 with Oak Leaf Re Ltd..

The $44.035m Oak Leaf Re 2014-1 private cat bond provides the cedant with a one-year source of fully-collateralized catastrophe reinsurance protection for losses to its Florida book of business, incurred from Florida named storms, using an indemnity trigger. The cat bond is split into three tranches of notes, each attaching at different levels of loss to the cedant.

The Oak Leaf transaction structures are unique in that the three tranches fulfill very different protection requirements for the cedant. The Class A tranche, which is $36.8m in size, provides both severity and aggregate protection in a top and drop mutli-section structure. The Class C tranche of notes, $2.125m in size, provides multi-section cover at a much lower level in the cedants reinsurance tower. The final tranche of Class D notes, $5.11m in size, provides reinstatement premium protection for the cedant.

JLTCM told Artemis that it was the larger Class A tranche of notes which upsized, growing approximately 30% during the offering period for this cat bond. Across the three tranches of notes the final pricing was approximately 6% to 10% below the original guidance, demonstrating investors appetite for the notes.

Rick Miller told Artemis that the pricing achieved for the Oak Leaf Re 2014-1 private cat bond was; “Materially lower than seen last year for the expiring program.”

As with all of the JLTCM private cat bonds there was no third-party risk modelling agency contracted for the deal and the investors performed their own analysis of the risks and modelling for the bond, developing their own unique views of the risk, hence there is no single attachment probability or expected loss that can be disclosed.

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