The Horseshoe Group managed private catastrophe bond and insurance-linked securities (ILS) issuance vehicle Eclipse Re Ltd. has completed its sixth transaction of 2019, taking the total risk capital issued using the transformer to just shy of $280 million for the year so far.
That’s significantly more activity than was seen from the Eclipse Re vehicle in previous years.
Part of the reason for which is the increasing use of the transformer and private ILS platform by cat bond and ILS fund manager Fermat Capital Management, we understand.
In this latest and sixth deal of 2019, a $48 million Eclipse Re Ltd. (Series 2019-06A) transaction has been completed using the vehicle, with the notes placed with qualified institutional investors.
In previous years the Eclipse Re Ltd. private cat bond vehicle has only tended to deal with around two issuances per-year, in 2018 totalling just $150 million and 2017 only $73.3 million.
Hence, the six now issued in 2019 for total risk capital of $280 million is a significant increase on the vehicle’s ILS transaction activity levels and it’s possible there are other deals which aren’t listed and so their information doesn’t become available to us.
Eclipse Re provides a platform for insurance-linked securities (ILS) funds or investors to engage in reinsurance and retrocession contracts more directly with ceding companies, with the result being a risk transfer arrangement that is transformed and securitized into private cat bond form.
In many cases the notes are listed on the Bermuda Stock Exchange (BSX) to enhance their liquidity.
For this sixth deal of 2019, Eclipse Re Ltd. has issued a single $48 million tranche of private catastrophe bond notes, which have been sold to investors or ILS funds and the proceeds from the sale of the notes will have been used as the collateral to underpin linked reinsurance or retrocession contracts.
The $48 million Eclipse Re Ltd. (Series 2019-06A) transaction saw special purpose Bermudian insurer Eclipse Re Ltd. issuing one tranche of Series 2019-02A notes from its segregated account SAC EC0024, with the notes having a due date of July 1st 2020.
We assume the issued private cat bond notes represent a one-year reinsurance or retrocession, likely entered into at the mid-year renewals, probably featuring U.S. wind, earthquake or other U.S. natural perils risks, given the contract running to the start of June 2020.
The single tranche of notes has been admitted for listing on the Bermuda Stock Exchange (BSX) as insurance related securities.
Typically, platforms like Eclipse Re are used by ILS fund managers who want an investable asset for cat bond strategies, rather than a pure collateralised reinsurance arrangement. By channeling a reinsurance or retro deal through a platform like Eclipse Re investable notes suited to more liquid ILS fund strategies can be achieved.
ILS and reinsurance market facilitator Horseshoe Group is the lead facilitator on these Eclipse Re transactions.
So far in 2019 Eclipse Re had already issued a $20 million Eclipse Re Ltd. (Series 2019-01A) deal, a $30 million Eclipse Re Ltd. (Series 2019-03A) deal, a $100 million Eclipse Re Ltd. (Series 2019-05A), a $25 million Eclipse Re Ltd. (Series 2019-04A) deal and most recently a $56.6 million Eclipse Re Ltd. (Series 2019-02A) transaction.
Adding on this $48 million Eclipse Re Ltd. (Series 2019-06A) deal takes the total to almost $280 million for the year.
We understand that Fermat has been using the Eclipse Re vehicle for more of its deal-flow this year, but we cannot confirm how many of the $280 million are from the manager and for its cat bond funds.
The Eclipse Re Ltd. platform was launched in 2017 to offer collateralized reinsurance providers a way to transform, securitize, market and place transactions with investors as private ILS or cat bond notes with secondary liquidity features.
By our reckoning, including this latest Eclipse Re transaction, private cat bond, or cat bond lite issuance for 2019 has now reached $711.6 million, according to Artemis data, which is the most active year for these private ILS deals on record.