Aon’s latest $45.5m Randolph Re private cat bond issued out of Guernsey

Broking giant Aon has facilitated the issuance of a new $45.5 million Randolph Re (Series 2024-1) private catastrophe bond that we believe could be a renewal of its wildfire deal for Mercury Insurance, but this time it has been issued out of Guernsey using the firm’s protected cell company White Rock Insurance Company PCC Limited.

Previous Randolph Re private catastrophe bonds have all been issued out of Bermuda using Aon’s White Rock Insurance (SAC) Bermuda Ltd. structure.

Aon has demonstrated the optionality it has available for its clients by using the Guernsey domiciled vehicle this time around.

This is a positive step for Guernsey’s ILS ambitions as this deal becomes one of just a few cat bonds issued there.

As said, we suspect this new $45.5 million Randolph Re 2024-1 private cat bond is likely to be a renewal of previous deals that featured reinsurance of wildfire risks for California headquartered property casualty insurer Mercury Insurance.

A year ago, a $45 million Randolph Re (Series 2023-3) private cat bond deal was issued that we knew to be exposed to wildfire risks and understood was for cedent Mercury Insurance.

Given that transaction matured on July 7th and this new 2024-1 issuance from the Randolph Re cat bond platform has come to light now, it seems highly likely to be a continuation of a series of annual private cat bond placements that provide capital markets backed wildfire reinsurance protection to that property casualty insurer.

Which would be the fifth year in succession that this private cat bond deal has been issued to benefit Mercury.

The first, in July 2020, was a $50.25 million Randolph Re (Series 2020-1) private catastrophe bond transaction that we learned covered California wildfire risks.

Then in July 2021, we reported that Mercury Insurance had secured $50.7 million of California wildfire reinsurance protection through a Randolph Re (Series 2021-1) private catastrophe bond again issued using Aon’s platform.

In July 2022, another wildfire exposed deal came from Aon’s platform, a$25 million Randolph Re (Series 2022-1) private cat bond again expected to have been for California headquartered property casualty insurer Mercury.

Then the $45 million Randolph Re (Series 2023-3) was issued a year ago and again covered wildfire risks and was assumed to be for Mercury.

So it feels reasonably safe to presume this Randolph Re 2024-1 private cat bond to again feature a transfer of wildfire risk to the capital markets, likely for Mercury. Although it is important to note that we do not have official confirmation at this time, it’s just an assumption for now.

It’s also important to note that this could be a bit broader than just California wildfire risks, but previous deals in the series have seen that state holding the highest exposure concentrations, in terms of expected losses for the private cat bonds.

Private placement cat bonds from the Randolph Re program are issued using a cell of Aon’s White Rock special purpose vehicle, in this case the Guernsey structure, while the brokers’ insurance management unit Aon Insurance Managers services the transactions and Aon Securities acts as structuring agent and bookrunner.

Aon launched its Randolph Re private cat bond platform in late 2019, as a dedicated platform for issuance of private ILS transactions.

Mercury Insurance is a P&C specialist insurer that underwrites a large portfolio of property risk in certain wildfire exposed parts of California, as well as other states, and has been utilising the ILS market to source reinsurance capacity for a number of years.

This use of ILS capacity developed into accessing the catastrophe bond market using Aon’s Randolph Re issuance platform, to secure a slice of the wildfire protection required through private cat bonds.

This, what we believe to be, fifth Randolph Re wildfire exposed private cat bond issuance saw Guernsey domiciled White Rock Insurance Company PCC Limited, acting on behalf of its segregated account Randolph Re 2024-1 and under the Randolph Re Program, to issue $45.5 million of Series 2024-1 notes.

The Series 2024-1 insurance-linked notes issued by Randolph Re are due as of July 7th 2025, which is the same maturity date as the 2023 deal.

As a result, given how the dates align, we suspect this latest Randolph Re private cat bond provides a one-year fully collateralised reinsurance agreement that has been securitised for the cedent, which as said we suspect to be Mercury Insurance.

Previous deals in that series for Mercury all provided the cedent with wildfire reinsurance protection focused mainly on California, covering fire losses following an earthquake as well, and were structured to provide per-occurrence reinsurance on an indemnity trigger basis.

With this latest private catastrophe bond completed, Artemis’ statistics on the ILS market now counts $258.25 million of private cat bond issuance so far in 2024. Analyse annual cat bond and related ILS issuance by type of deal using this interactive chart.

You can read all about this Randolph Re (Series 2024-1) private catastrophe bond transaction and every other cat bond in the Artemis Deal Directory.