MS Amlin behind Phoenix 1 Re, the first Asian cat risk focused sidecar

It turns out that MS Amlin was the sponsor behind the recently completed Phoenix 1 Re Pte. Ltd. (Series 2021-1) collateralised reinsurance sidecar transaction, which appears to have been the first sidecar to be solely focused on Asian property catastrophe risks.

MS Amlin said today that its Singapore based subsidiary MS Amlin Asia Pacific Pte. Ltd. has set up and launched a locally domiciled special purpose reinsurance vehicle (SPRV), Phoenix 1 Re Pte. Ltd..

The Singapore based vehicle, which is the first sidecar transaction to be domiciled in the country, will provide collateralised reinsurance capacity to support MS Amlin Syndicate 2001’s Asia specific catastrophe reinsurance portfolio, through its Singapore based underwriting platform.

The Phoenix 1 Re sidecar deal hits a number of firsts for the insurance-linked securities (ILS) market, being the first Singapore domiciled sidecar transaction, the first sidecar to solely feature Asia Pacific catastrophe risks from countries deemed to have greater protection gaps (as it excludes Australia and Japan), plus it was also more roughly 50% backed by ILS funds and investors from Asia itself.

This is all very important for the ILS market, which has a desire for more diversification from the Asia region, in terms of perils and capital sourcing.

MS Amlin’s new Singapore based sidecar ticks a lot of those boxes, while also no doubt benefiting from the grant program offered to Singapore ILS issuances.

Phoenix 1 Re secured just over $42 million of collateralized reinsurance capacity, giving the investors an opportunity to access MS Amlin Asia Pacific’s strong historical performing and diverse regional portfolio.

We’re told it’s a quota share transaction covering more than 10 Asia Pacific territories, but that it specifically excludes some key peak perils, including Japan and Australasia. As a result it delivers on the desire for diversification for ILS investors and also meets any mandates for closing protection gaps, given the territories covered will be those with lower insurance penetration rates, we’d expect.

Roughly half of the collateralised reinsurance capacity secured was supported by Asia based investors or fund managers, MS Amlin explained.

MS Amlin worked alongside the Monetary Authority of Singapore (MAS), Lloyd’s Asia and Hong Kong based ILS specialist ILS Advisers to set up Phoenix 1 Re, with the support of a wide range of local service providers.

Will Ho, CEO, MS Amlin Asia Pacific commented on the transaction, “We are delighted to have secured funding for Phoenix 1 Re. Through the creation of a remote risk facility, which caters to regional business, MS AAP will now be able to leverage larger capacity that we can deploy to our core clients on their reinsurance programmes as demand and growth increases in Asia. Phoenix 1 Re is an important long-term strategic initiative for MS AAP as we continue to seek ways to build capacity and relationships with capital market partners, and we are grateful for the support received from MAS, Lloyd’s Asia and ILS Advisers in establishing the vehicle.”

Tim Yip, of ILS Advisers who we understand supported and helped facilitate the transaction, added, “We are delighted to have been able to support MS Amlin, MAS and Lloyd’s Asia in what we truly believe to be a very important step in the continued development of the Asia ILS market. Phoenix 1 Re finally allows ILS investors to gain access to the regions diversifying perils and exposure in a way that is specifically catered to alternative capital provider’s differentiated risk appetites and requirements, and through an underwriting team that has shown consistent success in navigating a very diverse region. As a completely new and unique transaction, this further shows the growth and experience that the local region has gained over the past 2 years, in being able to ef ficiently facilitate these transactions.”

Pavlos Spyropoulos, CEO, Lloyd’s Asia also said, “The launch of MS AAP’s ILS vehicle is an important milestone in the Lloyd’s Asia platform’s growth story and evolution, setting a new paradigm for how capital can leverage the underwriting expertise we have developed in Singapore to access Asia Pacific business through Lloyd’s. The faith Phoenix 1 Re’s investors have placed in MSAAP is an endorsement of their strong underwriting capability, and of the value proposition of our platform in Singapore that enables local access to Lloyd’s unique licence network, financial security, expertise, and brand.”

Lim Cheng Khai, Executive Director, MAS, commented, “MAS welcomes the launch of Phoenix 1 Re, the first pan-Asian catastrophe bond that covers multiple natural catastrophe perils across more than 10 countries. Phoenix 1 Re has a unique structure that accommodates different policy renewal and inception dates within its underlying portfolio of Asian risks, which makes it attractive to a wider pool of insurance linked securitisation (ILS) investors. Phoenix 1 Re is also the 10th catastrophe bond issued in Singapore, and bears testament to MAS’ continuing effort to grow the Asian ILS market and facilitate the use of innovative ILS structures to narrow the protection gap in Asia.”

As we explained before, this isn’t really a catastrophe bond, in the typical sense. Rather, being an issuance of participating notes with a quota share underlying it, this is really a sidecar that has issued securitized notes to its investors.

For us, that is more ground-breaking than this being another cat bond, as Singapore as an ILS domicile stands in a strong position to help Asian re/insurers access the capital markets for quota share capacity, alongside excess of loss, industry loss, or parametric structured catastrophe bonds.

Read about reinsurance sidecar investments and other related transactions in our directory of collateralized reinsurance sidecars transactions.