Swiss Re Insurance-Linked Fund Management

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Kane SAC private cat bond platform issues third deal, Series 2014-2


Global independent insurance management firm Kane has completed another private catastrophe bond issuance through its Kane SAC Limited Note Program, with a $7.32m Series 2014-2 renewal of the Series 2013-1 transaction issued a year ago.

This is the third privately placed and issued cat bond lite type deal to come out of the Kane SAC (Segregated Accounts Company) Program on the insurance managers platform and we’re told it renews the first deal on the platform, albeit at a slightly smaller size than the $9,523,770 2013-1 issue. The Kane SAC platform has also been utilised by ILS fund manager Twelve Capital to issue its series of three Dodeka cat bond transactions.

The $7.32m of private cat bond notes issued in the Kane SAC Series 2014-2 deal have been listed on the Bermuda Stock Exchange, with Appleby Securities (Bermuda) acting as listing sponsor.

The 2014-2 notes were admitted to listing on the 10th July, according to the BSX announcement, and have a due date of the 10th June 2015, so having around an 11 month term, much like the 2013-1 deal which matured recently and that this transaction renews.

The Kane SAC Program Series 2013-1 deal featured underlying risk ceded from the Texas Windstorm Insurance Association (TWIA) so were exposed to U.S. North American wind (hurricane risks) on an indemnity trigger basis.

We’ve been told that this is a renewal deal, however the 2013-1 deal was not sponsored by TWIA. Rather TWIA was a passive player in the deal and the transaction was actually down to a participant in its reinsurance programme, on a collateralized basis, that wanted the risk in a liquid format, likely to meet a fund mandate. We hope to get some more information to 100% confirm the perils and trigger in the coming days.

It’s also safe to assume that this will be a zero coupon bond, with no need for a coupon if the investor or ILS manager has structured it for themselves and is benefiting from the collateralized reinsurance premium instead.

Private cat bond, or cat bond lite, platforms like Kane’s provide investors and ILS managers a degree of flexibility, enabling them to access risk in securitized form more cheaply and from smaller transactions. Many investors like pension funds, have mandates that insist on secondary liquidity in their investments, thus making catastrophe bonds and ILS a more viable option than deploying capital into collateralized reinsurance.

Leveraging a platform like this allows the risk to be transformed into a format with that liquidity element and full transferability if required. Hence these platforms could become increasingly useful to the ILS fund managers and direct investors, as a tool to pass risk through to add a liquidity element, as the collateralized reinsurance and cat bond sector grows further.

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