We can now report that it was Toa Re Europe, the Switzerland-based European reinsurance arm of Japanese group Toa Reinsurance Company Ltd., that sponsored the recent $25 million Artex SAC Limited – Silver Crane Notes private catastrophe bond transaction, as it looks to expand its relationships with ILS investor markets.
Toa Re Europe told us it has a “strategic ambition” to build on and foster ties to the capital markets for its reinsurance arrangements, with this new Silver Crane issuance reflecting those ambitions.
The $25 million placement, which as we reported last week was issued using Artex’s Bermuda based SAC transformer and private cat bond issuance vehicle, was placed with a handful of selected institutional investors, Toa Re Europe said.
The $25 million of notes cover European windstorm and earthquake risks, as well as earthquakes around certain Mediterranean locations.
Toa Re Europe underwrites reinsurance in Europe, the Middle East and North Africa, so the Silver Crane private cat bond provides it with a multi-year source of retrocessional property catastrophe reinsurance protection.
The notes have a three-year term, Toa Re Europe explained and the transaction is a renewal of a ‘Blue Crane’ arrangement a year ago, which was an ISDA-derivative with a one year term that was placed bilaterally in 2021.
Now, “Silver Crane underlines Toa Re Europe’s intention to develop its collaboration with capital market partners further,” the reinsurer said.
The underlying is an industry loss warranty (ILW) based on an index covering seven per-occurrence layers, designed to protect Toa Re Europe against European windstorms, as well as certain earthquake scenarios, for example covering regions around the Mediterranean Sea and continental Europe.
Each layer is geared towards an annual expected loss of around 1.0% each and the transaction was structured in a modular way as a synthetic quota share, bundling together what is a unique and diversifying set of independent natural catastrophe scenarios into a transparent index, Toa Re Europe explained.
The Silver Crane notes issuance benefited from structuring and distribution support from independent consultant RHA Advisory, run by ILS specialist Rom Aviv in Tel Aviv, Israel, working in collaboration with Bank Vontobel (Zurich, Switzerland) who also acted as Arranger for the transaction. RMS acted as risk modeller.
“From a strategic perspective, ‘Silver Crane’ adds an innovative and complementary pillar to the traditional retrocession approach for supporting our European treaty portfolio,” commented Philippe Regazzoni, the CEO of Toa Re Europe in Zurich.
Rom Aviv, CEO of RHA Advisory added, “It has been an absolute pleasure working with Bank Vontobel to support Toa Re and its energetic and innovative team in placing this clearly differentiating instrument, thus both enhancing Toa Re’s risk management tool kit as well as offering a unique proposition to the ILS community.”
Jin Shah, Director at RMS, also said, “RMS is pleased to provide the risk analytics and services Toa Re needed in securing capacity in the Capital Markets with this unique placement.”
The sponsor explained that the Silver Crane private catastrophe bond deal “underlines Toa Re Europe’s intention to develop its collaboration with capital market partners further.”
The $25 million of private ILS notes were placed with an international investor base of ILS funds and institutions from North America, Europe, and Asia.
In addition, the company said the notes were sold in a discounted ‘zero-coupon’ format, which provides for a small amount of leverage.
It’s encouraging to see Toa Re Europe building on its relationships with ILS funds and investors for its retrocession program and ceding more risk into the capital markets in an efficient catastrophe bond format.