Oxbridge Re optimistic on sidecar opportunities, as 2019 investors earn 36%

Oxbridge Re Ltd., the Cayman Islands based reinsurance firm, is optimistic about the opportunities it will see for its fully-collateralised reinsurance sidecar vehicle Oxbridge Re NS Ltd.

The company is also optimistic about the prospects for its reinsurance business, which of course will benefit from hardening rates at renewals over the coming year.

Oxbridge Re sources some of its retrocession from the capital markets using its sidecar vehicle Oxbridge Re NS, which also helps the company to benefit from some fee income and build its expertise in managing third-party capital as well.

The sidecar remains a very small affair for Oxbridge Re, having only renewed it at some $216,000 for the 2020 season.

So far, we’d imagine the Oxbridge Re NS Series 2020-1 noteholders are on track for a decent return, as hurricane losses have not been overly impactful to-date and the parent reinsurance company reports no losses so far this year.

Oxbridge Re has also confirmed the returns that investors in its 2019 sidecar issue earned, saying that sidecar investors in the Oxbridge Re NS Series 2019-1 participating notes earned a 36% return.

Investors in the 2020-1 sidecar issuance are likely on-track for a similarly healthy return, as long as it remains free from losses through the rest of the risk period.

“We continued to perform well through the first nine months of 2020. Our business model remains resilient and unaffected by the COVID-19 pandemic, and we are optimistic about the long-term prospects of our core reinsurance business as well as the opportunities for our side car,” explained Oxbridge Re Holdings President and Chief Executive Officer Jay Madhu. “Looking ahead, we continue to be prudent in our capital deployment as well as evaluate additional opportunities for growth and diversification of risk.”

Oxbridge Re first entered the insurance-linked securities (ILS) market with a quota share retrocessional reinsurance sidecar arrangement in June 2018, with a $2 million transaction completed with third-party investors.

Unfortunately, Oxbridge Re’s underwriting portfolio was hit hard by catastrophe loss events in the second-half of 2018, with hurricane Michael and the California wildfires both eroding the sidecar’s investor capital, the result being the structure facing a total loss.

Oxbridge Re persisted, launching a second, smaller reinsurance sidecar transaction in June 2019, when it sponsored a $600,000 Oxbridge Re NS issuance.

That sidecar issuance ran clean through its first six months, the second-half of 2019, managing to avoid taking on any losses from global catastrophe events such as the Japanese typhoons and hurricane Dorian.

It seems the sidecar also ran clean through the first-half of 2020 as well, as Oxbridge Re reported a 0% loss ratio for the period and has now confirmed that the investors in its 2019 sidecar issuance earned themselves a very healthy 36% return.

The renewal of the Oxbridge Re NS sidecar for 2020 was at a much smaller $216,000 size, perhaps a reflection of the more challenging capital raising environment for sidecars and quota shares generally earlier this year.

For more details on reinsurance sidecar investments view our directory of collateralized reinsurance sidecar transactions.