Hannover Re brings $84.5m of Seaside Re private catastrophe bonds

Global reinsurance giant Hannover Re has facilitated the issuance of another $84.5 million of Seaside Re private catastrophe bonds for 2022, with another eight issuances from its Kaith Re transformer vehicle coming to light.

Already in 2022, we’ve tracked $39 million of private catastrophe bonds in which Hannover Re has helped reinsurance risks be matched with capital markets and insurance-linked securities (ILS) investors in a more efficient manner.

Those two issues were a $15 million California quake focused LI Re (Series 2022-1) private cat bond and $24 million Seaside Re (Series 2022-1) cat bond covering unknown U.S. property catastrophe risks.

Now, we’ve learned of eight more Seaside Re transactions, all covering unknown U.S. property catastrophe risks, with $84.5 million of risk capital issued across the group of deals.

That takes Hannover Re’s Seaside Re private cat bond issuance to $108.5 million so far in 2022, on top of the $15 million issued under the LI Re account of Kaith Re.

A year ago, around the January 2021 reinsurance renewals, we counted $136.4 million Seaside Re cat bond lites, or private catastrophe bonds, from Hannover Re’s Kaith Re segregated accounts vehicle in Bermuda.

So this year, with nine Seaside Re transactions totalling $108.5 million, so far the figure is down slightly, but more could emerge and these issues while often tied close to reinsurance renewal seasons, are not reliant on the flow of renewal business and can appear at any time of the year.

Hannover Re continues to act as a facilitator to help investors access reinsurance related risk and return in securitized form and cedents to access the capital markets through acting as a risk transformer and facilitator for private catastrophe bonds and insurance-linked securities (ILS).

Hannover Re has used its Bermuda domiciled reinsurance transformer vehicle Kaith Re Ltd. to issue all eight of these new private Seaside Re cat bonds for 2022, in each case acting on behalf of a segregated account named Seaside Re.

Totalling $84.5 million, the eight new Seaside Re private cat bonds are: $10m Seaside Re (Series 2022-11); $10m Seaside Re (Series 2022-12); $5m Seaside Re (Series 2022-21); $5m Seaside Re (Series 2022-22); $4.5m Seaside Re (Series 2022-23); $30m Seaside Re (Series 2022-31); $8.5m Seaside Re (Series 2022-41); and $11.5m Seaside Re (Series 2022-42).

In each case, the proceeds from the sale of each tranche of privately placed notes to cat bond investors will have been used to fund collateral to support an underlying reinsurance or retrocession agreement, for whichever ceding re/insurer is the ultimate beneficiary of this protection.

That could, of course, be Hannover Re, which may utilise the Seaside Re program to enable investors to access its retro program in a securitized, cat bond like manner, but we can’t be sure.

Alternatively, Hannover Re uses the private cat bonds to augment the coverage it provides to ceding clients, to be able to supply larger capacity and help intermediate clients access to the ILS and capital markets, enabling it to play a bigger role in their renewals.

All eight of of these series of 2022 notes issued by Kaith Re’s segregated account Seaside Re are exposed to U.S. property catastrophe risks and have a due date of January 15th 2023.

So, they could represent investor or ILS fund shares of a reinsurance or retrocession tower, a one-year collateralized reinsurance or industry loss warranty (ILW) transaction entered into around the January 2022 renewals, or another private arrangement, as are most commonly seen with private catastrophe bond activity.

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, offering the potential for secondary liquidity and 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.

As we explained yesterday, 2021 saw a record more than $1 billion of private catastrophe bonds tracked by us at Artemis.

In 2022 so far, the figure already stands at $148.5 million, still short of last January’s $216.4 million, but with some weeks to run this month looks set to be another strong start to annual private cat bond activity.

You can read all about these Seaside Re private catastrophe bonds in our extensive Deal Directory and we’ll update you should any more come to light.

Update: On collection of additional deal data we’ve now recalculated prior year private catastrophe bond issuance and the total issuance from 2017 has now overtaken 2021, making that the record year at $1.1 billion.