Oxbridge Re’s sidecar shrinks to $216k for 2020 renewal

Cayman Islands based reinsurance firm Oxbridge Re Ltd. has renewed its fully-collateralised reinsurance sidecar vehicle Oxbridge Re NS Ltd. for 2020 at a downsized amount of just $216,000.

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 the timing was not ideal for the reinsurer or the investors backing its sidecar.

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 said the investors in its 2019 sidecar issuance have earned themselves a very healthy 36% return.

The reinsurer had said it was looking to upsize on the sidecar, as a supportive source of third-party capital to augment its underwriting capacity.

That still stands, as Oxbridge Re Holdings President and Chief Executive Officer Jay Madhu explained this week, “We are also pleased that our sidecar investors earned a strong 36% return for the treaty year ended May 31, 2020, and we anticipate growing this portion of the business in the future.”

It now transpires that support for a sidecar renewal seems to have been challenging to secure for Oxbridge Re, as the Oxbridge Re NS Ltd. sidecar vehicle has only issued a $216,000 tranche of Series 2020-1 notes to third-party investors.

The Covid-19 pandemic has made capital raising particularly challenging in the ILS market during the last quarter, which will have been  the critical time for Oxbridge Re to secure investor commitments for the reinsurance sidecar.

As a result, it’s not that surprising to see the structure shrink again and it is encouraging that Oxbridge Re places enough emphasis on the sidecar strategy to persist with it, even at smaller size.

For this 2020 sidecar issuance, Oxbridge Re NS entered into a quota share retrocession agreement with Oxbridge Reinsurance Ltd.

$216,000 of Series 2020-1 participating notes were issued and sold to investors, with the collateral used to provide quota share support for Oxbridge Re’s global property catastrophe excess of loss reinsurance business.

The notes are due to mature on June 1st 2023.

The $600k of Oxbridge Re NS 2019-1 notes had been scheduled to mature on June 1st 2022, but these have all been redeemed early the company said.

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