The Artex Risk Solutions owned segregated account reinsurance transformer platform, Artex SAC Limited, has completed issuance of the first private catastrophe bond seen from the vehicle in 2020, with a $30 million Artex SAC Limited – Tenby Notes transaction.
Issuance of this private cat bond, or private insurance-linked securities (ILS) arrangement, takes total private cat bond issuance for 2020 to almost $320 million, based on transactions listed in our Artemis Deal Directory.
That’s far behind where the private cat bond issuance market sat a year ago, as by the end of September 2019 over $735 million of deals we classify as privately placed had been recorded in our Deal Directory.
Private issuance cat bonds have seemingly suffered during the pandemic, but they remain a core feature of the ILS market, enabling sponsors to more readily access capital markets investors to support their reinsurance and retrocession needs, through smaller, privately arranged and placed transactions.
Artex’s SAC Limited vehicle based in Bermuda facilitates some of these private cat bond transactions, acting as a transformer for the risks and a securitization vehicle to issue notes to be sold to either individual or groups of investors, depending on whether a transaction is syndicated or bilateral in nature.
This private cat bond issuance (also termed a cat bond lite) has been completed and listed in Bermuda using the vehicle’s Artex SAC Limited ILS Note Program II.
This new transaction is the seventh we’ve listed in our Directory featuring the Artex owned segregated account company as issuer. The deal features $30 million of Artex SAC Limited – Tenby Notes, with the notes due October 10th 2022.
As ever, we assume a private cat bond issuance likes this consists of notes linked to certain property catastrophe risks, most likely representing a securitisation of either an indemnity or industry loss triggered collateralised reinsurance or retrocession transaction.
The transaction will have been securitised to make the investment compatible with certain ILS fund or investor mandates, offering the investors an option for secondary liquidity as well.
This Tenby transaction consists of $30 million of notes that were issued using the Artex SAC Limited vehicle and its ILS Note Program II, on behalf of a segregated account series named Tenby.
The notes have been placed with qualified investors and listed on the Bermuda Stock Exchange (BSX) as insurance related securities.
It’s typical for private cat bonds like this to feature peak property catastrophe perils, most commonly from the United States.
They tend to either be bilateral arrangements, where a cedent and investor opt to use a private ILS structure to securitise the risks involved in a reinsurance transaction into an investable form. Or sometimes syndicated, where a cedent wants to trade with multiple investors or ILS funds in a securitized format.
Private cat bond deals can also sometimes involve ILS fund to ILS fund transactions, which usually take the form of an industry loss warranty (ILW).
Structures like the Artex SAC vehicle provide an efficient way for cedants and investors to achieve risk transfer and full securitisation of the resulting investment into a form that suits a more liquid or catastrophe bond focused ILS fund mandate.
This private cat bond, or cat bond lite, activity continues to play an important role in the insurance-linked securities (ILS) market, helping ceding companies access the capital markets more easily and cat bond investors or funds access reinsurance related securitised risks from sponsors that may not be able to access the full 144A cat bond market.
While issuance is down in 2020 at just under $320 million, likely partly due to the disruption caused by the global pandemic, in 2019 we recorded just under $904 million of private cat bonds in our comprehensive catastrophe bond and related insurance-linked securities Deal Directory.
2019’s almost $904 million of private cat bonds came from 29 individual transactions, which compares to 2018’s $902.5 million from 26 transactions and 2017’s $1.05 billion of private cat bond issuance from 28 deals.
So far in 2020 we’ve recorded only 17 such transactions.