German reinsurance firm Hannover Re has facilitated another private catastrophe bond or ILS transaction, LI Re (Series 2014-2), as the second private bond transformation and issuance under the LI Re segregated account of Kaith Re Ltd.
Hannover Re first established the LI Re bond program segregated account back in October, when it transformed and facilitated the issuance of the $10.37m LI Re (Series 2014-1) securitization of a segregated cell of its Bermuda segregated accounts insurer Kaith Re Ltd.
LI Re (Series 2014-2) is the second use of this segregated account of Kaith Re and comes hot on the heels of yesterday’s news of another private cat bond issuance by Hannover Re, the $71m Leine Re segregated account deal. As with all of these deals information is limited and Hannover Re has said that it cannot comment on the private ILS it transforms on behalf of unknown cedents and investors.
With the $5m LI Re 2014-2 issue it seems that Hannover Re is once again working on behalf of a cedent and investor as a transformer and private cat bond service provider. It’s likely that a single investor is again involved and that Hannover Re has used its Kaith Re vehicle as a way to securitize the risk of a reinsurance contract into ILS form to meet an investors mandate for liquidity.
According to the listing details from the Bermuda Stock Exchange (BSX), this deal sees Kaith Re Ltd. acting as issuer on behalf of its segregated account “LI Re” to issue $5m of Series 2014-2 notes under the LI Re Bond Program. The $5m of notes have a due date of 10th February 2016, which would suggest a deal term of one year, or just over.
We don’t have any details on the perils involved, the trigger type, deal terms, risk levels or coupon. However the first LI Re deal was described as simply property catastrophe linked so it’s likely safe to assume that this LI Re 2014-2 issuance is too.
Hannover Re clearly sees a revenue stream from these private risk transformations, to complement its other work in ILS as a fronting reinsurer. Given the reinsurers status as one of the top four largest reinsurance firms globally it will likely make it an attractive partner for cedents and investors seeking to transform insurance risks into private catastrophe bond or ILS form.
The private cat bond LI Re (Series 2014-2) has been added to our Deal Directory for completeness, however the lack of information means it will not be fully included in all of our catastrophe bond and ILS market statistics.