The size of Cayman Islands based reinsurance firm Oxbridge Re Ltd’s latest collateralized sidecar issuance has now been revealed, with the firm reporting that its Oxbridge Re NS Ltd. vehicle issued $600,000 of notes at the June 2019 renewals.
We’d already reported that Oxbridge Re had successfully renewed its collateralized reinsurance sidecar vehicle Oxbridge Re NS Ltd. at the June renewal season, but the size of the sidecar renewal wasn’t clear.
Oxbridge Re’s sidecar faced a total loss in the 2018 accident year, with participating investors who backed the $2 million issuance in June 2018 losing all of their investments.
Oxbridge Re’s portfolio had been hit particularly hard by catastrophe events in the latter half of 2018, with hurricane Michael and the California wildfires both resulting in a hit to investors backing the reinsurer’s sidecar and the vehicle facing a total loss.
So investor appetite was likely dampened slightly this year, although did not disappear completely, allowing Oxbridge Re to successfully renew its Oxbridge Re NS Ltd. collateralized reinsurance sidecar with placement in June that adds to its catastrophe reinsurance protection for the 2019 wind season and year ahead.
In reporting its Q2 2019 results yesterday, Oxbridge Re revealed that the 2019 reinsurance sidecar placement was for just $600,000 of notes.
This is actually the smallest reinsurance sidecar deal we’ve ever recorded in our directory of collateralized reinsurance sidecar transactions.
The Oxbridge Re NS sidecar vehicle entered into a retrocession agreement with Oxbridge Reinsurance Ltd on June 1st 2019, the company explained.
$600,000 of participating notes were issued and sold to investors, with the resulting collateral used to support quota share retrocessional support for Oxbridge Re’s global property catastrophe excess of loss reinsurance business.
The $600,000 of Series 2019-1 participating notes are scheduled to mature as of June 1st 2022, so providing Oxbridge Re with a multi-year source of protection for the first-time from its sidecar vehicle.
Oxbridge Re has a significantly shrunken capital base for 2019, having suffered full limit losses across most of the reinsurance contracts it underwrote in 2018 it seems.
The company only managed to report a $205k loss for the second-quarter of the year, having only assumed just over $1.1 million of premiums, that earned net premiums of $93k.
Due to expenses that remained at the same level as the prior year, when net premiums earned were $334k, Oxbridge Re has reported an enormous 311% expense and combined ratio.
For Oxbridge Re, the fact it received some backing for a sidecar renewal will be encouraging and it demonstrates that smaller sidecar issuances are economically viable, once a vehicle is established.
But it may be a tough road for the reinsurer, as its capital base has clearly suffered and as a result it could struggle to return to a reasonable level of profitability very quickly.
For more details of reinsurance sidecar investments view our directory of collateralized reinsurance sidecar transactions.