Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

$14.55m Dodeka IX private cat bond issued for Twelve Capital


Twelve Capital, the specialist insurance and reinsurance linked investment and ILS fund manager, has completed and listed another private catastrophe bond transaction, its second in two days, a $14.55m Dodeka IX transaction.

Just yesterday, the $11.49m Dodeka V-2016 transaction came to light, as the latest private cat bond issued under the Twelve Capital series of deals. Today, the ILS fund manager has placed another private reinsurance transaction into the liquid ILS risk market with the completion of Dodeka IX.

Typically these deals are an industry-loss warranty (ILW) that has been transformed and securities into catastrophe bond form. Acquiring risk in securitised, transferable form for managers of insurance-linked securities (ILS) funds is vital, and particularly so when the primary issuance market for cat bonds has been slower, as seen in recent months.

The $14.55m Dodeka IX private cat bond transaction has been issued using the Artex SAC Limited ILS Note Program II segregated accounts company vehicle. Dodeka IX represents just one segregated account of the Artex SAC ILS note program, and has been securitised into private cat bond form resulting in the issuance of $14.55m of ILS notes.

The $14.55m transaction of insurance-linked notes are due on the 20th January 2017, so likely reflect a singal seasonal reinsurance or retrocession contract, covering the north American hurricane season throughout 2016.

It’s assumed that this transaction transforms an industry-loss warranty (ILW) contract, using a PCS industry loss trigger and so covers U.S. natural catastrophe perils, as has been typical of Twelve’s Dodeka private cat bonds to date. We cannot 100% confirm this though.

An ILW transaction provides a much simpler structured contract, in terms of features, making them efficient for transformation into an issuance of private cat bond notes and perhaps the most cost-effective way to transform risk into a liquid securitised form, for ILS fund managers such as Twelve Capital.

Dodeka IX’s $14.55m of notes have been listed on the Bermuda Stock Exchange, to enhance the liquidity of the issuance offering Twelve Capital improved options and transparency to trade the notes on the secondary cat bond market should they choose to.

The Dodeka series give ILS manager Twelve Capital a mechanism to access risk through collateralised reinsurance means, but to secure a liquid security for its cat bond fund strategy, or to meet an investors mandate.

Previous Dodeka private cat bond transactions include Dodeka I in January 2014, Dodeka II in February 2014, Dodeka IV in June 2014, Dodeka III in August 2014, Dodeka I – 2015 in February 2015, Dodeka V in May 2015, Dodeka VI in June 2015, Dodeka VII in July 2015, Dodeka VIII in June 2016 and most recently the Dodeka V-2016 private cat bond we announced yesterday.

The Dodeka IX private catastrophe bond has been added to the Artemis Catastrophe Bond Deal Directory and we will update the listing should any additional details on the underlying structure emerge.

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