Jardine Lloyd Thompson Capital Markets (JLTCM) Inc. has completed issuance of a second private catastrophe bond using its new Market Re issuance platform. The $31.825m Market Re Ltd. (Series 2014-2) has been privately placed on behalf of an unnamed sponsor.
Market Re 2014-2 was structured, arranged and marketed by JLT Capital Markets, who continues to provide smaller, or new cedants with a way to access the capital markets through catastrophe bonds. At $31.825m, the second Market Re issue is much larger than the first, showing that the platform already looks to be gaining traction so soon after its launch in May.
“Since launching the Market Re platform in May, we have seen considerable interest from both cedants and investors,” said Michael Popkin, Managing Director and Co-Head of Insurance-Linked Securities at Jardine Lloyd Thompson Capital Markets. “By increasing the efficiency of the overall issuance process, we have opened the market to new cedants to begin to engage with the capital markets.”
This second Market Re 2014-2 private cat bond provides its sponsor with a one year source of indemnity-based collateralized catastrophe reinsurance coverage for its Florida book of business for the peril of named storms.
The transaction features two tranches of notes. A $4.525m Class A tranche of notes provides the cedant with multi-section reinsurance coverage of a top/drop nature. A $27.3m Class B tranche of notes provides second-event protection to the cedant.
The transaction is again achieved in a zero coupon format, like so many other JLTCM arranged private cat bonds, with investors performing their own risk analysis in order to become comfortable with the risks involved.
“Market Re is a flexible platform that allows for highly customized solutions for our clients,” commented Rick Miller, Managing Director and Co-Head of Insurance-Linked Securities at Jardine Lloyd Thompson Capital Markets. “We expect to see the velocity of Market Re private cat bond transactions continue to increase.”
Insurance-linked securities investors will see the Market Re development as a positive for the market, with the potential to bring a significant additional chunk of investment capacity to those investors seeking catastrophe bond opportunities.
With JLTCM targeting smaller sponsors, or those new to cat bonds, any risk capital committed is likely additional to the typical cat bond market pipeline of 144A broadly marketed deals. Therefore these private issuance facilities have the potential to help the overall ILS market grow, particularly important in the current market environment.
Rick Miller agreed; “Market Re 2014-2 continues the theme of opening the door for more cedants to engage with the capital markets.”
“We are very excited to see that JLTCM continues to develop innovative structures which further reduce frictional expenses,” reflected Ed Hochberg, CEO of Jardine Lloyd Thompson Capital Markets. “These developments provide many more cedants with capacity from the capital markets that would otherwise be inaccessible.”