Swiss Re Insurance-Linked Fund Management

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Hannover Re in CHF 70m Leine Re private ILS transaction


German reinsurance company Hannover Re has again used its Bermuda-domiciled segregated accounts vehicle Kaith Re Ltd. to issue a CHF 70m ($71m) private insurance-linked security or catastrophe bond transaction using a segregated account named Leine Re.

Hannover Re’s Kaith Re vehicle, a Class 3 insurer and segregated accounts company, has previously been used by the reinsurer to provide quota share cessions of a portion of the reinsurers’ risk to investors, forming part of the firms K cessions series of transactions. It was also used recently for a private catastrophe bond transaction, known as LI Re, completed in October which saw the reinsurer acting as a private cat bond facilitator for an investor.

Late last week CHF 70m (approximately $71m) of securities were listed on the Bermuda Stock Exchange (BSX) under the listing classification Section V as insurance related securities which were issued by Kaith Re Ltd. acting in respect of a Segregated Account named as Leine Re. The CHF 70m of ILS notes are due for maturity on the 15th January 2015.

The segregated account, “Leine Re”, was set up on the 19th November 2014, for the purpose of issuing the Notes and entering into a retrocession agreement with Hannover Re, a Trust Deed and other related agreements and activities.

We don’t know at this time whether this is a life ILS or property catastrophe bond issuance. The name of the segregated account is particularly interesting as Hannover Re is the anchor investor in an ILS investment manager and fund with the name Leine Investment.

It is possible that this is a private cat bond (or ILS) facilitated by Hannover Re, using its Kaith Re vehicle, to enable Leine Investment and the Leine ILS fund to access a liquid and listed ILS securitized risk asset for its portfolio. That would allow Leine to access traditional reinsurance risks in liquid form to meet catastrophe bond mandates.

Back in 2013 Hannover Re told Artemis that its seed investment capital in the Leine Investment SICAV-SIF Insurance-Linked Securities Sub-Fund 1 had only partially been deployed, due to concerns over low cat bond pricing not meeting the fund’s mandated targets. This Leine Re deal may have been a way to get around that issue, by effectively creating the fund’s own private catastrophe bond investment opportunity.

It’s possible that the Leine Re notes cover a renewal deal with the protection beginning on the 1st January and running for one year, given the notes due date of 15th Jan 2016, however again we cannot confirm. Hannover Re is not benefitting from protection due to this deal, rather it acts as the risk transformer and private cat bond facilitator for this deal.

We’ve reached out to Hannover Re to request further details or confirmation on this private ILS or catastrophe bond transaction. At this time we haven’t added it to our Deal Directory, but will do if/when further information becomes available. We will update you if anything further emerges.

Update: We’ve now added the Leine Re private ILs transaction 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.

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