Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

$10m U.S. wind industry loss transaction issued on Tullett Prebon ILN platform


Tullett Prebon has successfully completed another issuance through its Insurance Linked Notes (ILN) platform, with a $10 million U.S. wind industry loss instrument arranged, securitised and issued to investors.

buy-sell-trade-imageElectronic and voice interdealer broker and part of the TP ICAP group Tullett Prebon revealed a trading and issuance platform for what it terms Insurance Linked Notes (ILN’s) back in September 2018.

The first transaction from the platform came to market in the third-quarter of 2019, as a $10 million industry loss warranty (ILW) trade between an insurance-linked securities (ILS) fund and a reinsurance counterparty was transacted and securitised, with one party involved reported to have been LGT ILS Partners, the specialist ILS fund management unit of global asset manager and private bank LGT.

It was followed by a second transaction in a $7 million Turkish earthquake exposed industry loss deal transacted with capital market investors.

For the third transaction we’ve seen from the insurance-linked notes (ILN) platform, U.S. wind is unsurprisingly the focus, given the time of year.

The platform allows for the securitisation and syndication of industry loss trigger instruments, so typically retrocessional reinsurance arrangements.

The latest transaction totals $10 million across protection buyer and seller notes, covering U.S. wind on a per-occurrence basis.

It’s not completely clear why, but the deal features two trigger points of $30bn and $40bn, which could be to define the range of industry losses between which it would payout.

Being a US wind industry loss trigger structure, we assume a PCS trigger will have been used and that it covers all hurricane exposed coastal regions of the United States.

Tullett Prebon has a dedicated insurance-linked securities (ILS) vehicle to support deal-flow from its ILN platform, having registered a Bermuda based special purpose vehicle, a segregated accounts structure, named ILN SAC Ltd.

Two tranches of notes have been issued by ILN SAC Ltd., both of which were admitted for listing on the Bermuda Stock Exchange (BSX) as insurance related securities.

ILN SAC Ltd. has issued a $6.875 million tranche of Class PS notes Series 1 and a $3.125 million tranche of Class PB notes, which correspond to the buyer and seller protection notes that the ILN platform produces for each of its transactions (PS being seller notes notes, PB being buyer).

The protection buyer notes make up a much larger proportion of the transaction than in previous ILN deals from Tullett Prebon, which is likely related to the way this industry loss instrument will deliver its retrocessional reinsurance coverage.

The notes are due December 30th 2021, suggesting this could be a transaction that covers two wind seasons.

The ILN platform provides a unique way for cedants to secure industry loss based reinsurance coverage from the capital markets, with the result being a fully transformed and securitised instrument.

We’ve added this latest transaction from Tullett Prebon’s platform to our Deal Directory as ILN SAC Ltd. (US-W-OCC-30B-40B).

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