Almost $110 million of Seaside Re private catastrophe bond transactions have had their maturity dates extended, suggesting that these privately placed ILS deals, that were issued by German reinsurance firm Hannover Re’s segregated accounts vehicle, Kaith Re Ltd., might be considered at-risk of loss.
Typically, a catastrophe bond or other insurance-linked securities (ILS) arrangement can have its maturity date extended into the future so as to hold the collateral in place while loss activity develops.
If a qualifying catastrophe loss, or aggregation of qualifying catastrophe losses, occurs late in the term of a catastrophe bond, or private insurance-linked securities (ILS) arrangement, but doesn’t quite reach the trigger, or only triggers a partial payout, it’s important for the beneficiary of the coverage to be able to extend the term so as to know the collateral is still available should the loss creep higher and a larger recovery become possible.
There are other reasons extensions of maturity can occur, but it is most typical for this to be because of the potential for a recovery to become possible, or a recovery to increase in size, from the cat bond or ILS structure.
In this case, we’ve learned that $52.5 million of Seaside Re private catastrophe bonds issued in January 2020 and another $56.75 million issued in January 2021 have all had their maturity dates extended.
In total there are eleven Seaside Re series of private cat bonds that have been extended, with the 2020 vintage issuances having been due for maturity at the end of December 2021, while the 2021 vintage issuances were all due for maturity January 15th 2022.
Now, all eleven series of notes issued under the Seaside Re program by Kaith Re Ltd. have had their maturity dates extended through to April 15th 2022.
The affected notes are detailed below.
- $10m – Seaside Re (Series 2020-21)
- $5m – Seaside Re (Series 2020-22)
- $30m – Seaside Re (Series 2020-31)
- $7.5m – Seaside Re (Series 2020-41)
- $3.75m – Seaside Re (Series 2021-11)
- $4m – Seaside Re (Series 2021-21)
- $4m – Seaside Re (Series 2021-22)
- $5m – Seaside Re (Series 2021-23)
- $30m – Seaside Re (Series 2021-31)
- $3.75m – Seaside Re (Series 2021-41)
- $6.25m – Seaside Re (Series 2021-42)
As ever, it’s not clear to us what catastrophe or severe weather loss events could have caused these extensions of maturity. It is possible that these are aggregate reinsurance or retrocession structures, in which case there could be a number of qualifying loss events still under development.
It’s also possible that the beneficiary is actually reinsurance firm Hannover Re, as it could be utilising the Seaside Re private cat bonds to enable investors to access its retrocession program in a securitized manner, but we cannot be sure.
At the same time as these private cat bonds having their maturity dates extended, three issuances from 2021 were also allowed to mature on schedule.
Hannover Re continues to act as a facilitator to help investors access reinsurance related risk and return in securitized form and cedents to access the capital markets through acting as a risk transformer and facilitator for private catastrophe bonds and insurance-linked securities (ILS).
For 2022, Hannover Re’s Kaith Re vehicle has issued nine Seaside Re private catastrophe bonds tranches, totalling $108.5 million of risk transferred and securitized, as well as one LI Re private cat bond which transferred $15 million of California earthquake risk.
Details of every private catastrophe bond we’ve tracked can be found in our Deal Directory, which you can filter by type of transaction making it simpler to view only private cat bond issuances.
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