The Oxbridge Re NS Ltd. fully collateralized reinsurance sidecar vehicle sponsored by Cayman Islands based reinsurance firm Oxbridge Re Ltd. has avoided losses from all of the recent global catastrophe loss events.
The Oxbridge Re NS quota share reinsurance sidecar has managed to avoid any impact from events including the Japanese typhoons right up to the most recent Hagibis, while also avoiding any losses from hurricane Dorian during Q3 as well.
Oxbridge Re reported its third-quarter results yesterday and revealed that the company got through the period with a loss ratio of zero, as none of the catastrophe events occurring in the period affected its underwriting portfolio.
As the Oxbridge Re NS sidecar takes a retrocessional quota share from parent Oxbridge Re, it shares in any losses suffered and as a result has come through the quarter loss free as well.
Oxbridge Re’s sidecar vehicle faced a total loss in its first year of operation in 2018, as the participating investors who backed the $2 million issuance in June 2018 lost all of their investments due to major catastrophes.
Oxbridge Re’s portfolio had been hit particularly hard in 2018 by catastrophe events in H2, with hurricane Michael and the California wildfires both eroding sidecar investor capital resulting in the vehicle facing a total loss.
Oxbridge Re persisted though and entered into a second sidecar transaction in June 2019 when the firm sponsored a smaller $600,000 Oxbridge Re NS issuance.
The Oxbridge Re NS sidecar vehicle entered into a retrocession agreement with Oxbridge Reinsurance Ltd on June 1st 2019, with the $600,000 of participating notes issued and sold to investors and their capital used to collateralize the 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 now 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.
Having suffered full-limit losses across many of the reinsurance contracts it underwrote in 2018, getting through the recent major catastrophes without any impact will be somewhat of a relief for Oxbridge Re.
“Our conservative risk management underwriting focus allowed us to remain unaffected by the devastation caused by Hurricane Dorian on the Atlantic Coast, Typhoon Hagibis in Japan, the recent California wildfires and various other devastating events worldwide,” explained Oxbridge Re Holdings President and Chief Executive Officer Jay Madhu.
“This also marks the second year of deploying our side car and we are pleased with the results thus far. With a strong cash and restricted cash position, our equity currently translates to a book value of $1.39 per common share. Looking ahead, we remain optimistic about the long-term prospects for our business as we continue to evaluate additional opportunities for growth as well further diversification of risk,” Madhu continued.
The reinsurer still fell to a loss for the third-quarter and first-nine months of 2019, as it has less capital to deploy following the major catastrophe losses suffered in 2018.
But Oxbridge Re has managed to deliver positive income to the investors in its Oxbridge Re NS sidecar during the period, which will have pleased its third-party capital providers and also shows that positive premium flows continue from what business the firm has managed to underwrite in 2019, despite the limited capital base.
Oxbridge Re reported that the income attributable to participating notes noteholders in the Oxbridge Re NS sidecar vehicle came out at $70,000 for the quarter and $94,000 for the nine months ended September 30th 2019.
It remains to be seen whether Oxbridge Re can struggle on with its lower capital base to remain a viable business, but it is encouraging the sidecar has delivered positive income and shows its underwriting portfolio can turn a technical profit.
For more details on reinsurance sidecar investments view our directory of collateralized reinsurance sidecar transactions.