The Alturas Re Ltd. collateralised reinsurance sidecar vehicle of global specialist re/insurer AXIS Capital has completed a new issuance of 3,628 preferred shares, meaning options for third-party investors to access the returns of AXIS’ underwriting business seemingly expand.
AXIS has been expanding its insurance-linked securities (ILS) activities, particularly in private quota shares in recent years.
At the same time the group has been making increasing use of its Alturas Re reinsurance sidecar structure, which allows it to syndicate some of its risk to third-party investors in securitised form.
The Alturas Re sidecar remains a relatively unique proposition in the reinsurance sidecar market, as it is dual use in featuring some tranches of property catastrophe reinsurance related risk, as well as tranches that provide investors with access to the returns of some of AXIS’ primary property insurance risks.
Most collateralised sidecar investment vehicles are focused on one or the other, or merge them within a single quota share arrangement across the sponsors portfolio.
Now, Alturas Re’s usefulness to AXIS appears to have expanded again, with the first issuance of preferred shares from the structure, which are likely to be supportive of investors access to AXIS’ reinsurance risks in a slightly different form.
It has been more typical of late for the Alturas Re vehicle to issue notes to investors, with the size of the issuance available at the time we uncover a new transaction.
In this latest issuance, Alturas Re Ltd. has issued 3,628 of Series 2020-3R preferred shares, which each have a par value of $0.01 and are due June 30th 2021.
We’re assuming that the R in the series denotes reinsurance-linked notes, while in previous issues the I has denoted insurance-linked issuances.
These Alturas Re 2020-3R preferred shares have likely been issued to satisfy an investor that sought a more equity like way to access the returns of the sidecar’s reinsurance portfolio of risks that AXIS has ceded to it, instead of accessing it through principle at-risk notes.
The 3,628 of Series 2020-3R preferred shares issued by Alturas Re have been privately placed with qualified investors and listed on the Bermuda Stock Exchange (BSX).
They likely support a cession of mid-year renewal timed reinsurance risk to a third-party investor, that sought an equity like way to access the returns of the sidecar.
This latest use of the Alturas Re sidecar vehicle shows AXIS utilising the structure again for the mid-year renewals, as it had in 2019.
More recently, at the end of 2019 we reported that AXIS Capital had issued $64.14 million of notes in its first Alturas Re sidecar issuance for 2020, in a deal that looks to have been a renewal of the property catastrophe reinsurance layer of the vehicle.
Then, we reported in January that AXIS Capital added another layer to its Alturas Re collateralised sidecar issuance for 2020, with $47.25 million of what looked to be property catastrophe insurance linked notes issued in two tranches.
AXIS’ use of direct quota share arrangements with ILS investors has been an important part of its capital arrangements in recent years, while the Alturas Re sidecar enables the firm to syndicate its risks more broadly.
With the Alturas Re sidecar, AXIS Capital can take greater control of these quota share style cessions to investors and syndicate the risks more widely and in different forms to suit investor-needs, as evidenced with this latest arrangement.
All the while earning a share of fee income by managing the risks within its own vehicle, rather than ceding them to an investor-owned protected cell structure.
For details of many reinsurance sidecar investments and transactions over the history of the ILS market, view our comprehensive list of collateralized reinsurance sidecars transactions.