AlphaCat Managers, the insurance and reinsurance linked investment unit of Validus Group has completed a $5 million Alpha Terra Validus I private catastrophe bond transaction, which we understand is designed to source risk in securitised form for one of its mandates.
The transaction, which we also believe to be the first from ILS fund managers AlphaCat, has emerged through the Aon Insurance Managers owned White Rock Insurance (SAC) Ltd. Class 3, Class C and segregated accounts reinsurance company, which we revealed last week had listed an “ILS Program” on the Bermuda Stock Exchange (BSX).
We suspected at the time that a transaction would be imminent with a listing of ILS notes from the White Rock program and late Friday the Alpha Terra Validus I notes were admitted to the BSX’s roster of ILS transactions.
We understand from sources that this is ILS fund manager AlphaCat Managers sourcing risk for itself (possibly alongside its parent Validus Group), then utilising the White Rock vehicle to transform and securitise the risk into notes for one of its own investment strategies.
It is to be assumed that the underlying risks are property catastrophe related, likely from a reinsurance contract that AlphaCat has participated in.
On Friday the White Rock Insurance (SAC) Ltd. vehicle, acting in respect of a segregated account named Alpha Terra Validus I, listed $5 million of Alpha Terra Validus I principal at-risk zero coupon notes on the BSX as insurance related securities. The notes are due January 15th 2018, so this likely represents a single annual reinsurance contract.
Being zero coupon notes, the Alpha Terra Validus I issuance will like a collateralised reinsurance transaction offer a benefit as the cedent will have funded the premium upfront, which offers a kind of leverage to the investor.
The private catastrophe bond, or cat bond lite, is proving an effective way for ILS fund managers to source risk in securitised form to meet specific cat bond fund mandates.
We’ve added the Alpha Terra Validus I private catastrophe bond to the Artemis Deal Directory, however it will not be fully included in all of our catastrophe bond and ILS market statistics due to the lack of available information.