It’s funny how old names from the reinsurance and catastrophe bond sectors tend to keep reappearing in the news. One of those company names that just won’t seem to go away is Lehman Re, the Bermuda reinsurance arm of Lehman Brothers. Clearly the Lehman name has had a huge impact on the catastrophe bond market and the changes to collateral structures and deal terms implemented after the failure of Lehman Brothers has actually helped to shape the cat bond market into what it is today.
Bermuda’s Royal Gazette newspaper carries a story on the possible sale of Lehman Re for $14m. As part of the bankruptcy most of Lehman Brothers assets will be sold off. It will be interesting to see whether anyone is brave enough to resurrect the Lehman Re name or whether it would even successfully be sold.
Those who’ve been involved in the catastrophe bond market for 10 years or more will be aware that Lehman Re actually sponsored a number of catastrophe bond deals in its time. Seismic Ltd. issued in 2000 was Lehman Re’s first $150m California earthquake cat bond and possibly the first which helped to transfer some of the California Earthquake Authority’s risk. Redwood Capital I Ltd., in December 2001, was another California quake cat bond, this time definitely linked to the California Earthquake Authority’s reinsurance cover Lehman Re provided. That was quickly followed by Redwood Capital II Ltd. in March 2002 which again transferred some of the CEA’s risk to the capital markets.
Lehman is a name which will be remembered for a long time in the cat bond and insurance-linked securities space, the sale of Lehman Re is just another chapter in a very long story.