German reinsurance giant Hannover Re has brought the first private catastrophe bonds that we’ve learned of in 2023, with three Seaside Re cat bond lites totalling $32.5 million of risk capital issued, the latest, use of its Kaith Re transformer vehicle to come to light.
These are the first three private catastrophe bonds we’ve listed in our Deal Directory for 2023. Last year, Artemis recorded $738 million of private catastrophe bond issuance.
Hannover Re has been assisting with the matching of reinsurance risks to capital markets and insurance-linked securities (ILS) investors in a more efficient manner for some years now and its Kaith Re structure has issued many of the private cat bonds we’ve tracked.
Hannover Re operates, in part, as a facilitator to help investors access reinsurance related risk and returns in securitized form, as well as helping cedents to access the capital markets.
The reinsurer does this by acting as a risk transformer and facilitator for 144A cat bonds, private catastrophe bonds and other collateralised reinsurance related insurance-linked securities (ILS).
Hannover Re utilises its Bermuda domiciled reinsurance transformer vehicle Kaith Re Ltd. to issue its private Seaside Re cat bonds, and for 2023 these first three to come to light all hail from the structure, issuing on behalf of its Seaside Re segregated account.
With each of these private cat bond deals, the proceeds from the sale of each tranche of privately placed notes to cat bond investors will fund the collateral requirements to support an underlying reinsurance or retrocession agreement, for whichever ceding re/insurer is the ultimate beneficiary of the protection.
This could, of course, be Hannover Re, which can utilise the Seaside Re program to enable investors to access its retro program in a securitized, cat bond like manner.
Hannover Re can also uses these private cat bonds to augment the coverage it provides to ceding clients, to supply larger, diversified capacity limits and help intermediate its clients access to the ILS and capital markets, allowing it to play an even more important role in their renewals.
All three of of these Series 2023 notes issued by Kaith Re on behalf of its segregated account Seaside Re and we’ve learned are exposed to U.S. property catastrophe risks, and have a due date of January 15th 2024.
These cat bond lite deals can represent, investor or ILS fund participation in a reinsurance or retrocession tower, a one-year collateralized reinsurance or industry loss warranty (ILW) transaction entered into around the January 2023 renewals, or another private arrangement transformed to be matched with capital market investor appetite.
Hannover Re’s Seaside Re private catastrophe bond program provides ILS investors with a mechanism to access certain U.S. property catastrophe reinsurance risks in cat bond lite securitised form, affording the potential for secondary liquidity and the ability to meet certain of their investor and fund mandates.
As with the majority of the private ILS and cat bond lite deals we analyse and track, the full details of the transaction and underlying reinsurance or retrocessional coverage they provide are not available to us.
Track different types of catastrophe bond issuance using our chart that breaks down the market by 144A property cat bonds, private cat bond lites, cat bonds covering other classes of business, and mortgage ILS deals.
You can read all about these new Seaside Re 2023 private catastrophe bonds in our extensive Deal Directory and we’ll update you should any more come to light.