Swiss Re Insurance-Linked Fund Management

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Twelve Capital in new $11.49m Dodeka V-2016 private cat bond issue


Another Dodeka private catastrophe bond has been issued for Twelve Capital, the specialist insurance and reinsurance linked investment and ILS fund manager, with the completion and listing in Bermuda of an $11.49m Dodeka V-2016 transaction.

This is the second Dodeka private cat bond issuance from Twelve Capital in 2016, as the ILS fund manager continues its strategy of sourcing liquid, securitised ILS assets by transforming reinsurance arrangements, typically an industry-loss warranty (ILW), into catastrophe bond form.

Acquiring risk in securitised, transferable form for managers insurance-linked securities (ILS) fund strategies is important, and particularly so when the primary issuance market for cat bonds has been slower, as seen in recent months.

The Dodeka V-2016 private cat bond transaction was issued using the Artex SAC Limited ILS Note Program II segregated accounts company vehicle. Dodeka V-2016 represents a single segregated account of the Artex SAC ILS note program, and it has been securitised into private cat bond form resulting in the issuance of $11.49m of notes.

The $11.49m of insurance-linked notes have a due date of the 5th January 2017, so likely reflect a seasonal reinsurance or retrocession contract covering the Atlantic hurricane season through 2016.

It’s assumed that the transaction is for a transformed industry-loss warranty (ILW) contract, using a PCS industry loss trigger and so covering U.S. natural catastrophe perils, as has been typical of Twelve’s Dodeka private cat bonds to date. We can’t 100% confirm this though.

An ILW transaction provides a simpler structure, in terms of features, making them ripe for transformation into private cat bond notes and perhaps the most cost-effective way to transform risk into a liquid securitised form, for ILS fund managers such as Twelve Capital.

The $11.49m of Dodeka V-2016 notes have been listed on the Bermuda Stock Exchange, enhancing the liquidity of the notes which offers Twelve Capital improved options and transparency to trade the notes on the secondary cat bond market should it choose to.

The Dodeka series provides Twelve Capital with a way to access risk through collateralised reinsurance means, but to come away with a liquid security for its cat bond fund strategy, or to meet an investors mandate.

Previous Dodeka private cat bond transactions include Dodeka I in January 2014, Dodeka II in February 2014, Dodeka IV in June 2014, Dodeka III in August 2014, Dodeka I – 2015 in February 2015, Dodeka V in May 2015, Dodeka VI in June 2015, Dodeka VII in July 2015 and most recently Dodeka VIII in June 2016.

The Dodeka V-2016 private cat bond has been added to the Artemis Catastrophe Bond Deal Directory and we will update the listing should any additional details on the underlying structure emerge.

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