A seventh transaction of the year has now been issued using the Horseshoe Group managed private catastrophe bond and insurance-linked securities (ILS) issuance vehicle Eclipse Re Ltd., which lifts the total risk capital issued using the transformer to almost $300 million in 2019 so far.
The Eclipse Re private cat bond transformer and issuance vehicle has seen significantly more use in 2019 than in prior years, which has been helped by the fact that specialist cat bond and ILS fund manager Fermat Capital Management has been using the platform for some of its deal flow, we understand.
In its newest and seventh transaction of 2019, a $20 million Eclipse Re Ltd. (Series 2019-07A) private catastrophe bond has been issued and placed with the notes placed with qualified institutional investors or a group of investors, but of course possibly also a single ILS fund such as Fermat as these private deals are often bilaterally arranged.
In 2018 Eclipse Re’s private cat bond issuance totalled just $150 million and 2017 only $73.3 million. So, with seven deals now issued in 2019 for total risk capital of $300 million it is a significant increase on the vehicle’s ILS transaction activity levels.
Eclipse Re offers the market 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 its seventh transaction of 2019, Eclipse Re Ltd. has issued a single just slightly under $20 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 used as the collateral to underpin related reinsurance or retrocession contracts.
The $20 million Eclipse Re Ltd. (Series 2019-07A) transaction saw special purpose Bermudian insurer Eclipse Re Ltd. issuing one tranche of Series 2019-02A notes from its segregated account SAC EC0025, with the notes having a due date of October 1st 2020.
As a result, it’s assumed the issued private cat bond notes represent a one-year reinsurance or retrocession arrangement.
The single $20 million tranche of notes has been admitted for listing on the Bermuda Stock Exchange (BSX) as insurance related securities.
Platforms like Eclipse Re are typically used by ILS fund managers who want an investable asset for their cat bond fund strategies, rather than a pure collateralised reinsurance arrangement.
By channeling a reinsurance or retro deal through a transformer and securitisation platform like Eclipse Re, investable notes suited to more liquid ILS fund strategies can be achieved.
ILS and reinsurance market facilitator and service provider Horseshoe Group is the lead on these Eclipse Re transactions, given it manages the vehicle and offers it to clients.
So far in 2019 Eclipse Re has 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 and a $48 million Eclipse Re Ltd. (Series 2019-06A) deal.
With this new $20 million 07A private cat bond, the total rises to almost $300 million for the year.
We understand that Fermat has been using the Eclipse Re vehicle for more of its deal-flow in 2019, but we cannot confirm how many of the $300 million are from the manager and destined for its range of cat bond funds.
The Eclipse Re Ltd. platform was launched in 2017, offering 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 almost $731.5 million, according to Artemis’ data, which is the most active year for these private ILS deals on record.