Further extension for at-risk $50m Seaside Re 2017-3 private cat bond


There has been a further extension to the maturity date for the $50 million Seaside Re 2017-3 transaction, a private catastrophe bond issued by German reinsurance firm Hannover Re’s segregated accounts vehicle, Kaith Re Ltd., suggesting it remains at-risk of losses from the 2017 hurricanes and catastrophes.

The further maturity extension for the $50 million of Seaside Re 2017-3 notes if likely to allow for loss development to continue, most probably due to the continued loss amplification related to hurricanes from 2017.

It’s becoming apparent that the eventual total loss to ILS investors from the 2017 catastrophe events is unlikely to be known for some months to come, as extensions to catastrophe bonds and private ILS exposed to the events continues.

This $50 million Seaside Re 2017-3 private cat bond was issued by Hannover Re’s reinsurance vehicle Kaith Re Ltd. in January 2017, as the segregated account Seaside Re was used to issue a single $50 million tranche of Series 2017-3 private catastrophe risk exposed notes to ILS investors.

In January of this year we first reported that the Series 2017-3 notes issued by Seaside Re had not been allowed to mature as scheduled, with maturity pushed back to allow for loss development. This typically occurs where clarification over whether losses are faced and how much they will be is needed, so as to identify whether investors in the notes will receive all of their investment principal back when transaction is finally allowed to mature.

Subsequently, the maturity date was pushed back even further, with the maturity date for the $50 million of Seaside Re 2017-3 private cat bond moved to June 30th 2018.

Now, this maturity has been extended once again, although not as much, with the maturity now slated for August 15th 2018.

The Seaside Re private cat bond program provides investors with exposure to U.S. property catastrophe reinsurance related risks, so it’s assumed that it faces potential losses from events such as the three major hurricanes of 2017, possibly also to the wildfires in California as well if a multi-peril or aggregate arrangement.

Often these private cat bond arrangements feature industry loss triggers and can be based on transformed ILW’s, so it may be that new updates from a data provider such as PCS are required to determine whether investors in it will eventually face a loss. Alternatively it could be an indemnity arrangement, so clarity of the ceding companies losses may still be required to determine any loss payment due.

This $50 million Seaside Re 2017-3 tranche of notes was part of an issuance of a trio of Seaside Re 2017 private cat bonds, but only this tranche was extended, suggesting that it was the riskier of the three and more time is required for loss development to clarify whether it will attach and identify whether investors will receive all of their investment principal back when it is finally allowed to mature.

This Seaside Re 2017-3 private cat bond is featured in our listing of cat bond payouts and defaults, where you can find details of all catastrophe bonds triggered and payouts made, since the market began.

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