German reinsurance firm Hannover Re has facilitated the issuance of $1 billion of catastrophe bonds in recent days, with its work as the transformer reinsurer for recent cat bonds Cranberry Re Ltd. (Series 2015-1) and Alamo Re Ltd. (Series 2015-1).
Hannover Re has always been one of the global reinsurance firms that has stood in between the capital markets and cat bond sponsors, helping cedents to access sources of cost-effective ILS capital in an efficient manner.
As part of its insurance-linked securities (ILS) activities, which also see the reinsurer acting as a fronting and transforming reinsurer for collateralized reinsurance deals as well, Hannover Re has transferred $1 billion of tropical storm and hurricane risks for the US-based Massachusetts Property Insurance Underwriting Association (MPIUA) and Texas Windstorm Insurance Association (TWIA) to the capital markets.
These residual market, or insurers of last resort, often use a transformer reinsurer to help them to access the capital markets more efficiently when sponsoring catastrophe bonds.
The MPIUA sponsored the $300m Cranberry Re 2015-1 cat bond, while TWIA has sponsored the largest cat bond of 2015, the $700m Alamo Re 2015-1. GC Securities acted as sole structurer and bookrunner for both cat bond transactions.
“We are delighted that in coordination with our partners we have again successfully transferred insurance risks to the capital markets; this underscores Hannover Re’s long-standing expertise in the field of alternative risk transfer. In so doing, we are able to support our clients while at the same time generating low-risk and stable margins for our company,” commented Hannover Re CEO Ulrich Wallin.
This is the second cat bond for TWIA that Hannover Re has acted as a transformer for. Hannover Re has itself a long history in insurance securitization and catastrophe bonds, having placed the first risk securitization as far back as 1994.