GC / MMC’s Isosceles ILS platform issues $32.75m of private cat bonds

Isosceles Insurance Ltd., the private insurance-linked securities (ILS) and catastrophe bond issuance platform operated by Marsh McLennan and reinsurance broker Guy Carpenter, has issued three new tranches of notes, that together total just over $32.75 million of private cat bond notes.

The Isosceles Insurance Ltd. (or Isosceles Re) platform was set up in early 2020 as a private ILS and private cat bond (or cat bond lite) issuance platform, as the broking group looked to put to use a rent-a-captive vehicle it had inherited when MMC acquired JLT.

The Isosceles Re vehicle issues 4(2) or 4(a)(2) securities, so private placements including privately placed catastrophe bonds, insurance-linked securities (ILS) and also the securitisation of other transformed collateralised reinsurance arrangements.

A number of Isosceles Re private cat bond transactions are already listed in our extensive catastrophe bond and related insurance-linked securities (ILS) Deal Directory, including a $16.5 million Isosceles Insurance Ltd. (Series 2020-A1) from June 2020, a $25 million Isosceles Insurance Ltd. (Series 2020-C1) from September 2020 and a $25 million Isosceles Insurance Ltd. (Series 2021-B1) deal in April 2021.

Now, we’ve learned that Isosceles Insurance Ltd. has issued three new tranche of privately placed insurance-linked notes, or private cat bonds, totalling just over $32.75 million across the three tranches issued.

As with every private ILS deal we come across, the details available are limited so we’ve had to make some assumptions in order to include these new Isosceles Re private ILS transactions in our catastrophe bond Deal Directory. We’ve included them as individual deals, as we have no way of knowing if the tranches are related to a sponsor, or layers of the same reinsurance or retrocession arrangement.

The first tranche issues is an $11 million Isosceles Insurance Ltd. (Series 2021-A1) issuance of notes. They are structured as discounted zero coupon participating notes, typical of a private ILS transformation of a collateralised reinsurance or retrocession contract, converting it into something more liquid and investable as a security, usually for a cat bond specific fund or strategy.

The $11 million of Isosceles Re 2021-A1 notes have a maturity date of May 5th 2022.

The second tranche is a roughly $10.92 million Isosceles Insurance Ltd. (Series 2021-C1) issuance of notes. Again, these are structured as discounted zero coupon participating notes.

But in this case the $10.92 million of Isosceles Re 2021-C1 notes are due June 6th 2022.

The third tranche is a roughly $10.84 million Isosceles Insurance Ltd. (Series 2021-E1) issuance of private cat bond notes, also structured as discounted zero coupon participating notes.

The $10.84 million Isosceles Re 2021-E1 notes have a due date of June 6th 2022 as well, suggesting they may be related to the C1 notes, although we cannot be certain.

All three tranches of private cat bond notes have been privately placed with qualified investors, which will typically be a specialist ILS or cat bond fund manager.

As with every private ILS or cat bond deal we come across, we make the assumption they represent a securitization of property catastrophe reinsurance or retrocession risks, transformed to provide an ILS fund or ILS investor with an asset that meets a catastrophe bond mandate, offering greater options in terms of secondary liquidity.

Normally, these private cat bond arrangements represent collateralised reinsurance for a primary insurance carrier, or retrocession for a reinsurer, that is transformed and securitised, to either be assumed by a single ILS fund or investor, or a small group of funds/investors.

Or, they can be an ILS fund-to-fund transaction (hedging), or the transformation of a specific arrangement, such as an industry-loss warranty (ILW) into something with secondary transferability.

We also assume that reinsurance broker Guy Carpenter’s dedicated capital markets unit GC Securities will have structured these Isosceles Insurance Ltd. private ILS transactions and acted as bookrunner for them.

While Marsh Management Services will likely have acted as the insurance manager, given the structure is under its control.

These three new issues from Isosceles Re take the number of deals we’ve seen from the platform to six in total, representing close to $100 million of risk capital issued, all of which can be read about in our extensive cat bond Deal Directory.