Oak Leaf Re Ltd. (Series 2015-1) – Full details:
The protection provided by the $53.03m of Oak Leaf Re 2015-1 cat bond notes is available on both a per-occurrence and aggregate basis and the transaction structure features an indemnity trigger. As with the previous Oak Leaf Re deals, the cat bond is structured as a zero coupon transaction.
There are a number of interesting features in the Oak Leaf Re cat bond which are worth noting.
The deal has been structured into three tranches, including one which is multi-section and covers both severity and frequency losses for the cedant. Another of the three classes of notes is designed to provide reinstatement premium protection (RPP), which is an interesting addition that would be attractive to many sponsors.
The Class A tranche, which includes $47m of notes covering $50m of limit, provides both severity and frequency protection. In other words, this tranche provides either per-occurrence or aggregate protection and features a shared limit.
The Class C tranche, which includes $1.77m of notes, and is a private layer of per-occurrence cover. It sits low down in the reinsurance towers, so is a riskier tranche providing a higher premium to the investors. Being private we don’t have any further details of this tranche.
The final Class D tranche, of $4.26m of notes covering $4.5m of limit, provides single-shot per-occurrence protection. This tranche provides the reinstatement premium protection (RPP), effectively the cedant pays upfront for the protection to cover the need to pay for a reinstatement of cover.
In terms of pricing, being a private transaction and a zero coupon bond these notes do not have a coupon that is exactly comparable with most cat bond issuance. We understand the Class A tranche priced at a 6% net rate-on-line, relative to the limit, while the Class D tranche priced at 5.33%, again relative to the limit. We don’t have that detail for the private layer tranche.