Zurich headquartered insurance and reinsurance linked investment fund manager Twelve Capital Management has completed its fifth private catastrophe bond transaction of the year, with an $18.322 million Dodeka XVII transaction that listed in Bermuda yesterday.
The Dodeka private catastrophe bond series of privately arranged and placed insurance-linked securities (ILS) arrangements are an increasingly integral part of Twelve Capital’s strategy to source property catastrophe risks in securitised and liquid form for its ILS fund mandates and investors.
These privately securitized and placed cat bond lite arrangements allow Twelve Capital to transform property catastrophe reinsurance or retrocession risks into an investable form, that is suited to a liquid cat bond fund strategy.
This latest deal, Dodeka XVII, is the nineteenth Dodeka private ILS transaction and the fifth from Twelve Capital of 2018 so far.
Including this Dodeka VII transaction, Twelve Capital has now securitized roughly $358 million of catastrophe reinsurance risks through this series of private cat bonds, or cat bond lites.
As with other recent Dodeka transactions, the Dodeka XVII private cat bond has been issued using Artex’s SAC Limited vehicle, managed by ILS facilitator Artex, with Dodeka XVII representing a single segregated account of this issuing vehicle.
The underlying catastrophic peril exposure in the segregated account has been transformed into private ILS or cat bond form, resulting in the issuance of the $18.322 million of tradable and listed principal-at-risk ILS notes.
The $18.322 million of Dodeka XVII insurance-linked notes have a due date of the 27th December 2018, so likely represent a reinsurance or retrocession contract designed to provide coverage across the duration of the U.S. wind season.
The reason for this is unknown, but it is possible that Twelve Capital has been securitising tranches of a larger retrocessional reinsurance arrangement secured at the mid-year renewals, either being part of the same reinsurance layer or tower, or a similar structure, with each slice being securitised and transformed at different times. However, we cannot confirm this.
Dodeka XVII’s $18.322 million of notes were admitted to the Bermuda Stock Exchange (BSX) as Section V Insurance Related Securities after the notes were sold to qualified ILS investors, which will be funds or managed accounts operated by Twelve Capital.
As with all of the Dodeka series of private ILS deals, we assume that this Dodeka XVII cat bond lite features a transformed industry-loss warranty (ILW) contract, using a PCS industry loss trigger and covering U.S. natural catastrophe risks (which is most likely U.S. wind because of the risk period).
ILS manager Twelve Capital continues to put the Dodeka series of private catastrophe bonds to good use, benefiting from an effective way to offer capital markets backed reinsurance coverage to reinsurance and retrocession counterparties, while the sourced catastrophe risk is transformed to securitised note form, offering potential liquidity for its ILS investment funds.