ILS
News in brief
The ILS market has been fizzing with activity in 2021, with some observers predicting this year could set a new record for issuance of cat bonds. With many new products being launched, and re/insurers scrambling to attract executives to help them meet demand, there has been plenty of news to keep up with at Bermuda:Re+ILS. Here are some of the top stories we have covered in recent weeks.
Issuance
The catastrophe bond market is poised to record its highest ever issuance levels in 2021, with nearly $8 billion of issuance having been recorded in 2021 up to June 2, according to a Moody’s sector report on the insurance-linked securities market.
Cat bond issuance outpaced what was seen in the same period of 2020, a year that itself saw record cat bond issuance, despite concerns around COVID-19. Moody’s reported that cat bond issuance had increased to $11.4 billion in 2020, nearly double the issuance in 2019. Mortgage insurance-linked notes (MILN) are also on track to surpass the level reported in 2020, said Moody’s, and now represent nearly 30 percent of all ILS outstanding.
New SPI
Essent Guaranty, the wholly-owned subsidiary of Essent Group, has obtained $557.9 million of fully collateralised excess of loss reinsurance coverage from Radnor Re 2021-1, the newly formed Bermuda special purpose insurer.
The reinsurance covers mortgage insurance policies written in August 2020 through March 2021, with Radnor Re 2021-1 funding its reinsurance obligations through the issuance of five classes of MILNs, with 12.5-year legal maturities, to eligible third party capital markets investors in an unregistered private offering.
Bellemeade blossoms
Gallagher Re partnered with Arch Mortgage Insurance Company (Arch MI) in raising and placing traditional reinsurance capacity for Bellemeade Re 2021-2, a special purpose reinsurer. Gallagher Re obtained $93,210,000 of indemnity reinsurance for Arch MI, and was one of seven different reinsurers to participate, the largest number seen on a transaction of this kind to date.
The second Bellemeade transaction of 2021 included a pool of approximately $36 billion of mortgages issued primarily from December 2020 through to end March 2021. It was the sixth Bellemeade Re transaction featuring a simultaneous side-by-side traditional reinsurance execution.
Storm & quake
Ariel Re has sponsored its first 144A index-triggered catastrophe bond issued by Bermuda special purpose insurer Titania Re. Titania Re is providing $150 million of multi-year collateralised reinsurance cover to Ariel Re using an indexed industry loss trigger, protecting against North American named storms and earthquakes.
The cat bond closed on June 16, 2021, with TigerRisk Capital Markets & Advisory acting as sole structuring agent and joint bookrunner, while Aon Securities acted as joint bookrunner.
New Vista
Vantage Risk has sponsored its first 144A index-triggered catastrophe bond transaction, with the deal being upsized by 50 percent following strong investor demand. The bond was issued by Bermuda special purpose insurer Vista Re, which had originally targeted a $150 million deal, but ultimately issued $225 million of series 2021-1 class A principal at-risk variable rate notes, following strong investor demand.
The designated risk period runs from May 15, 2021 to May 14, 2024.
Euro bond
Franklin Templeton has launched a new UCITS cat bond fund, the Franklin K2 Cat Bond UCITS Fund, bringing the total number of liquid alternative strategies within the Franklin Templeton Alternatives Funds range to eight.
The fund is domiciled in Luxembourg and will be registered in 11 European countries, including Germany, France, Italy and the UK. The fund is managed by Jonathan Malawer, managing director and head of ILS, commodities and environmental strategies at K2 Advisors in New York, and seeks to generate attractive risk-adjusted returns, with limited correlation to other asset classes.
New hire at Miller
Miller, the independent specialist re/insurance broker, has hired Erik Manning as head of ILS as it looks to bolster its capital markets expertise. Manning takes over as Miller’s head of ILS in the third quarter of 2021, subject to approval by the Bermuda Department of Immigration.
He has over 20 years of experience in the sector and joins from Peak Capital where he was chief executive officer. He is joined by Sebastian Alexander, who relocates from Miller’s London office, and Francesca Cacace.
Grandi joins Twelve Capital
Twelve Capital has hired Marcel Grandi as senior advisor for ILS. Grandi previously spent 13 years with Credit Suisse ILS and 10 years with Munich Re in various senior functions. In his new role he supports the investment team with the sourcing of ILS transactions, and is based in Zurich.
Myers moves
WR Berkley has hired Vincent Myers as vice president of alternative capital. He was formerly head of third party capital at AXIS Capital in New York and joined AXIS in June 2019, before which he was a director at Rewire Holdings.
New rating
AM Best has assigned a financial strength rating of A (excellent) to Nectaris Re, an operating subsidiary of Nectaris Holdings, both of which are domiciled in Bermuda. The rating has a stable outlook. According to Nectaris Re’s business plan its business strategy is to retrocede all of its business to Horseshoe Re II segregated accounts company (Horseshoe Re II) with cells that are funded by ILS funds managed by Leadenhall Capital Partners.
The business written via MS Amlin, which is expected to account for approximately 90 percent of total limits ceded to Nectaris Re, will be 100 percent retroceded to Horseshoe Re II on a fully collateralised basis.
Convergence green light
ILS Bermuda has confirmed it will go ahead with its Convergence 2021 event on October 6, 2021, as an in-person event. Delegates will also be able to attend the one-day event virtually.
