RenaissanceRe’s collateralized reinsurance sidecar like vehicle Fibonacci Reinsurance Ltd. has completed a new $125 million issuance of notes, in a Series 2018-2 transaction that will have brought investors and funds a new slice of the Bermudian reinsurers risk, in a format similar to a catastrophe bond.
Fibonacci Re, as we understand it, features a selected portfolio of risks from RenaissanceRe’s property catastrophe book, which are then securitised and the vehicle issues notes that are similar to cat bond notes.
As a result it meets the mandate of cat bond funds and investors, but the risk profile is more akin to a sidecar, in delivering a slice of RenRe’s business to the investors.
RenaissanceRe first used the Fibonacci Re vehicle at the start of 2017, with a $140 million initial issuance of Series 2017-1 participating notes. This was followed up with a $45 million tranche of Series 2017-2 Class A participating notes in June 2017, as RenRe put the vehicle to work during the mid-year reinsurance renewals as well.
In 2018 Fibonacci Re has issued a $70 million tranche Series 2018-1 notes so far, with this new $125 million Series 2018-2 being its second outing for RenRe this year.
These Fibonacci Re issues are not just for third-party investors, we understand, as they are also designed to satisfy the needs of some of RenRe’s own investment portfolios, particularly those in search of cat bond notes.
As a result Fibonacci Re is an efficient way for RenRe to source risk in securitised form for its other ILS funds, hence the reinsurers other ILS fund mandates, such as Medici, may also be an investor benefiting from this latest transaction.
This new $125 million Series 2018-2 tranche of notes issued by Fibonacci Re are exposed to property catastrophe risks, we understand, and have a due-date of December 20th 2018, so likely represent a property catastrophe reinsurance or retrocession contract designed to cover the U.S. wind and hurricane season.
As a result it could perhaps be looked on more as RenRe sourcing retrocessional protection than the reinsurer sharing its risk related returns with investors, in this case.
The $125 million of newly issued notes have been admitted for listing on the Bermuda Stock Exchange (BSX), classified as Insurance Related Securities and placed with qualified investors.
Whether you consider these catastrophe bond notes or a collateralized reinsurance sidecar issuance of notes likely depends on your motivations for investing in the ILS space, or using it for protection. The end result is a securitized investment product with the return based on underlying catastrophic reinsurance risks, with protection for the underlying risk contracts included.
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