Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

$23.812m Dodeka VIII private cat bond completed by Twelve Capital


Twelve Capital, the specialist insurance and reinsurance linked investment and ILS fund manager, has completed its latest private catastrophe bond, or cat bond lite, with the issuance and listing of a $23.812m Dodeka VIII cat bond issue.

It’s the first Dodeka private catastrophe bond from ILS and reinsurance investment manager Twelve Capital since July 2015, but this new issue continues the series of regular issues around major reinsurance renewals, as Twelve Capital looks to acquire risk in securitised, transferable form for its insurance-linked securities (ILS) fund strategies.

Dodeka VIII was issued in recent days and saw its $23.812m of insurance-linked notes listed on the Bermuda Stock Exchange (BSX) yesterday. As is typical with these private cat bonds, details are limited.

Dodeka VIII has been issued using the now renamed Artex SAC Limited segregated accounts company vehicle. Dodeka VIII represents a single segregated account of the Artex SAC Limited issuance vehicle, and it has been securitised into private cat bond form. The $23.812m of insurance-linked notes have a due date of the 5th January 2017, so are likely to represent a seasonal reinsurance or retrocession contract covering the Atlantic hurricane season.

As usual, we assume that this is a transformed industry-loss warranty (ILW) contract, using a PCS industry loss trigger and so covering U.S. natural catastrophe perils, as has been the trend with all Dodeka’s to date. We can’t 100% confirm this though.

An ILW transaction provides a simpler structure, in terms of features, making them ripe for transformation into 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.

The listing of the $23.812m of Dodeka VIII notes on the Bermuda Stock Exchange enables the liquidity of the notes to be enhanced, offering Twelve Capital better options and transparency to trade the notes on the secondary cat bond market should it choose to.

Many private cat bond or ILS deals are securitised, in this manner, but never opt for the additional liquidity offered by a listing. Twelve Capital has always opted for this with the Dodeka’s, enabling them to be transferred to another investor if the manager should choose.

The Dodeka series provides Twelve Capital with a way to access risk through collateralised reinsurance means, but to come away with 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 and Dodeka VII in July 2015.

Dodeka VIII 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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