Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Private cat bond platform launched by Tokio Solution Management and GC Securities


Very interesting news has just come in that Tokio Solution Management Ltd., the collateralized reinsurance and insurance-linked securities arm of reinsurer Tokio Millennium Re, and GC Securities, the capital markets arm of broker Guy Carpenter, have teamed up to create and launch a private catastrophe bond platform called the Tokio Tensai™ Platform.

The two companies have collaborated to create a solution which they say will bring catastrophe bond sponsors a more efficient platform for funding excess of loss catastrophe reinsurance in the capital markets.

Kathleen Faries, CEO of Tokio Solution commented; “Tokio Solution is thrilled to introduce the Tokio Tensai™ Platform as an alternative to the traditional Rule 144A offering process. We are committed to using our experience and strength within the Tokio Millennium Re Group to bring innovative products and services across the full spectrum of the convergence market.”

The platform will see Tokio Solution Management use its Shima Reinsurance Ltd. Bermuda domiciled Class III Segregated Accounts Company as an issuing vehicle for clients looking to sponsor catastrophe bond transactions. GC Securities will act as a placement agent for each of the private placements transacted through Shima Re.

By simplifying and standardising the process of catastrophe bond issuance, the Tokio Tensai Platform will significantly reduce the time and costs traditionally associated with cat bond issuance by leveraging the facilities of Shima Re as well as proprietary shelf documentation.

The Tokio Tensai Platform aims to allow clients the same kind of flexibility that a normal cat bond issuance allows and will allow clients to customize their coverage using a range of triggers and reinsurance structures while still offering the speed to market and reduced costs that the platform is designed for.

Chi Hum, Managing Director at GC Securities, said; “This joint effort between GC Securities and Tokio Solution provides capital markets access to an underserved segment of (re)insurance buyers whose capacity needs are below the threshold amount needed to justify a traditional Rule 144A catastrophe bond issuance. The advantages of capital markets capacity previously available only to the largest of capacity buyers will now be made available to a broader client segment.”

The name Tokio Tensai™, is derived from the Japanese word “Tensai,” which in English means “Genius” and “Act of God” – an appropriate reference for a product that is innovative and covers catastrophe risks. The English translation of Shima is “Island.”

This isn’t the first facility to be established aiming to offer cheaper, private catastrophe bond issuance for sponsors, but with the backing of Tokio Solution and GC Securities it perhaps stands a better chance of being successful. Other private cat bond facilities have not seen a huge amount of business to date as far as we are aware, but with the rising profile of catastrophe bonds and third-party capital this is perhaps the ideal time to launch such a facility.

The need for facilities which can enable cat bonds to be transacted more simply and cost-effectively is clear and this platform should help smaller sponsors to access capital market sources of reinsurance protection. This platform will also be welcomed by investors who are looking for ways to access new deal flow to deploy capital into. It will also be welcomed by investors who are not Qualified Institutional Buyers (QIB’s), so perhaps smaller investors, who may now be able to access new cat bond issues without needing to come under Rule 144A regulations.

It will be interesting to see how this facility progresses and we hope that it results in new deal flow coming into the catastrophe bond market fairly quickly.

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