Tokio’s Shima Re issues $70.6m Hotaru 2 private cat bond renewal

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Tokio Solution Management Ltd., the collateralized reinsurance and insurance-linked securities (ILS) unit of global reinsurer Tokio Millennium Re AG, has completed a new private cat bond through its Shima Re vehicle, with the issuance of a $70.6 million Hotaru 2 transaction which we believe to be a renewal for the 2015 Hotaru.

The 2015 Hotaru private cat bond deal saw a collateralized reinsurance transaction fronted, arranged and transformed into private catastrophe bond notes by Tokio Millennium Re and Tokio Solution Management, helping an ILS investor or fund manager to access a securitized source of Japanese property catastrophe risks.

That 2015 transaction featured JPY 5,850,000,000 (roughly $47.67m at the time of issuance) of Japanese earthquake risk transformed and issued as notes through a Shima Re segregated cell named Hotaru. The 2015 transaction ran for a two-year term, maturing around now.

So we assume that this Hotaru 2 transaction is a renewal for the 2015 deal, and as the Hotaru 2 transaction saw JPY 8 billion of notes issued (roughly $70.6m at today’s rate) we also assume this is an upsizing of the previous transaction.

Shima Reinsurance Ltd. (Shima Re), acting on behalf of its segregated account named Hotaru 2, has issued approximately $70.6m of securities which are due 7th August 2019, so likely represent an underlying two-year duration reinsurance contract that has been collateralized and transformed through Shima Re.

So it’s likely that again Tokio Millennium Re AG Bermuda branch acted as the fronting entity, ceding the risk to Tokio Solution’s Shima Reinsurance Ltd. vehicle which in turn issued the notes using a segregated account named Hotaru 2.

We also assume that the risk involved in this Hotaru 2 private cat bond transaction is linked to Japanese earthquake exposure, although we cannot confirm this.

Tokio Solution Management will have facilitated this transaction and acted as the insurance manager of the Shima Reinsurance Ltd. vehicle.

The JPY 8 billion of notes issued by Shima Re through this Hotaru 2 private transaction have been admitted to the Bermuda Stock Exchange as Section V Insurance Related Securities and placed with qualified investors.

We’ve listed this private transaction in the Artemis Deal Directory for completeness, as Hotaru 2. We will update you if any further information on this transaction comes to light.

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