According to Artemis’ sources, one tranche of the almost $54 million Oak Leaf Re Ltd. (Series 2017-1) catastrophe bond is set to pay out to sponsor Southern Oak Insurance Company, after the insurers losses from hurricane Irma triggered the cat bond.
The Oak Leaf Re 2017 catastrophe bond was the seventh in the cat bond series, with all the Oak Leaf deals having been structured and placed by the Jardine Lloyd Thompson Capital Markets (JLTCM) team, for sponsoring insurer Southern Oak.
This cat bond transaction was structured into four classes of notes, with one a multi-section tranche covering both severity and frequency, while another tranche offered the sponsor a source of reinstatement premium protection (RPP) and others offered excess-of-loss reinsurance protection.
The Oak Leaf Re 2017 cat bond provides the insurer with a source of reinsurance against losses from Florida named storms and hurricanes.
Hurricane Irma is the most significant storm to strike the Florida peninsula since the insurer began to tap the cat bond market and it appears that this collateralized form of reinsurance coverage is set to respond to Southern Oak’s losses.
We’re told that the Class B tranche of notes, an excess-of-loss layer of this cat bond issuance is now set to pay out in full to the sponsor, after its losses hit a level high enough to trigger the indemnity protection the notes provided.
The Oak Leaf Re 2017-1 Class B tranche of notes is only $1.04 million in size, but the additional excess-of-loss reinsurance payment from capital market investors will assist Southern Oak in paying its claims from hurricane Irma.
The Class B tranche of notes had been marked down by cat bond markets just prior to hurricane Irma’s landfall in the United States, we understand, and the price dropped further after Irma’s landfall, with the notes marked down for bids in the low single-digit cents on the dollar.
This is the second catastrophe bond to be triggered by losses from Hurricane Irma, joining Safepoint’s Manatee Re 2016 Class C notes which are set to pay out.
For details of all catastrophe bonds triggered and payouts made, since the market began, view our list of cat bond defaults.