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JLTCM completes $31.074m Market Re 2015-3 private cat bond


The Jardine Lloyd Thompson Capital Markets (JLTCM) team has completed another transaction using its own platform to issue a $31.074m Market Re Ltd. (Series 2015-3) privately placed catastrophe bond for an unnamed sponsor.

The JLTCM team continues to be one of the most active arrangers of smaller privately placed cat bonds, or cat bond lites as they’re also known, enabling clients to use their own issuing vehicles or to utilise JLTCM’s Market Re, a platform it launched as a joint venture with Horseshoe Group.

Helping new sponsors and smaller ceding companies to access capital markets ILS capacity, the JLTCM team has now been responsible for 13 deals involving over $485m of risk capital, with ten private cat bond transactions that the team has worked on still outstanding in the market.

This Market Re Ltd. (Series 2015-3) private catastrophe bond is a renewal of a maturing transaction. It will provide the unnamed cedant with a one-year source of fully-collateralized catastrophe reinsurance protection for its Florida book of business.

Reinsurance protection is for the peril of Florida named storm risks and the transaction is structured using an indemnity trigger, to more closely match it with other forms of reinsurance the cedant benefits from.

The transaction saw the Market Re vehicle, JLTCM’s own issuance vehicle that seeks to make accessing the capital markets cheaper for smaller deals and sponsors, issuing two tranches of Series 2015-3 notes which were marketed and sold to ILS investors.

The two tranches provide the cedant with different kinds of reinsurance cover.

The first tranche, Class A, is sized at $6.699m of notes and provides both frequency and severity protection, so is structured on an aggregate basis. The second Class B tranche is $24.375m in size and provides per-occurrence protection to the cedant. We understand that the Class A tranche has grown in this years renewal transaction.

Structured as zero coupon bonds, the two tranches represent $7.5m of limit for the Class A notes and $25m of limit for the Class B notes.

Michael Popkin, Managing Director and Co-Head of Insurance-Linked Securities at Jardine Lloyd Thompson Capital Markets, explained that the issuance platform is gaining traction; “Market Re is continuing to become an even more valuable part of reinsurance risk transfer solutions.”

“Because of Market Re’s cost effective structure and overall ease of execution, our cedants are seeing Market Re private placement cat bonds as integral to their overall programs,” Popkin continued.

The value proposition of private cat bond platforms like Market Re is that they can help smaller cedants to access different types of risk capital more efficiently and cost-effectively.

“The Market Re approach has made the capital markets more accessible to more cedants, which has completely changed the way they think about their programs. By having more options, cedants can access the right markets for the right part of their program,” Rick Miller, Managing Director and Co-Head of Insurance-Linked Securities at JLTCM explained.

JLTCM see a robust forward pipeline of interest in the Market Re platform and hope to see the coverage provided through it expand.

Miller commented; “We feel confident that the volume and diversity of Market Re deals will continue to increase.”

CEO of JLT Re North America, Ed Hochberg, explained that Market Re provides a complementary service to its clients, enabling them to be capital agnostic; “This efficient path to capital markets execution is opening up a number of opportunities across the growing range of JLT’s clients.”

The JLTCM team specialise in private placement cat bonds, seeking to make issuance and sponsorship cheaper for clients. Some are issued through the clients own SPI, others through Market Re. The team explained some of the cost benefits of this approach.

“Our standalone SPI deals and Market Re deals are substantially lower in frictional costs than full 144A issuance, which is why we’ve been able to bring so many new cedants and perils to the marketplace.

“Furthermore, the Market Re cost structure is even less than the standalone one, which, under certain circumstances, has further opened up the range of cedants who can work with the capital markets,” Michael Popkin explained.

Rick Miller added; “Our aim with both of these methods of risk transfer is to democratize the access to the capital markets. Given the potential for relatively broad syndication, we see opportunities for cedants of varying sizes, including larger cedants, to go the private placement cat bond route.”

It’s also worth noting that we are yet to see a Market Re 2015-2 transaction, suggesting that the JLTCM team have another private cat bond in the pipeline which will likely be seen in the coming weeks.

The Market Re Ltd. (Series 2015-3) private catastrophe bond has been added to the Artemis Deal Directory, where you can read about all of the previous Market Re deals.

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