Hannover Re’s Kaith Re issues $15m LI Re California quake private cat bond

A $15 million private catastrophe bond transaction covering California earthquake risks has come to market, with the LI Re (Series 2023-1) deal, issued by the Hannover Re owned Kaith Re vehicle, taking private cat bond issuance to almost $411 million year-to-date.

Hannover Re has facilitated the transaction, using its Bermuda domiciled reinsurance transformer and segregated account vehicle Kaith Re Ltd. to issue this new $15 million LI Re 2023-1 private cat bond, acting on behalf of a segregated account named LI Re.

It’s the first private cat bond under the LI Re segregated account since a $15 million issuance from back in January 2022.

However, Hannover Re has since facilitated the issuance of numerous Seaside Re private cat bonds since then, that are also issued by its Kaith Re Ltd. vehicle in Bermuda. We reported earlier today that a number of the Seaside Re deals remain in extension.

Hannover Re continues to assist investors in accessing reinsurance related risk and returns in securitized formats, while helping cedents to access the capital markets, by acting as a risk transformer and facilitator for 144a cat bonds, private catastrophe bonds such as this, and other insurance-linked securities (ILS) arrangements in fronted collateralized reinsurance form.

The German headquartered global reinsurer is a key facilitator in the market, putting its expertise, balance-sheet and ratings to work in helping to grow the ILS market and facilitate the smooth transfer of cedent risk to the capital markets.

This new $15 million LI Re 2023-1 private cat bond, transforms and securitises the underlying reinsurance related contract risks contained in the segregated account, and is scheduled for maturity on October 15th 2025, so could represent a two-year reinsurance arrangement.

That’s a little unusual, as most private cat bonds have a one-year duration at most, making this less typical but perhaps a sign of the private transactions being increasingly accepted by investors and therefore able to become more useful to cedents.

As with all previous LI Re private cat bonds, this latest LI Re 2023-1 issuance transfers California earthquake risk to the capital markets, so providing an unknown cedent with collateralized reinsurance or retrocessional protection for that peril, that could be running over a two-year term.

This new $15m of LI Re Series 2023-1 private cat bond notes have been listed on the Bermuda Stock Exchange (BSX) as Section V – Insurance Related Securities, with Ocorian Securities (Bermuda) Ltd. acting as the listing sponsor, and were sold to qualified institutional investors.

The underlying transaction for this private cat bond will most likely be a collateralized reinsurance arrangement, or perhaps an industry loss warranty (ILW), covering the peril of California earthquake risk, which is typical of private cat bond arrangements. Further details of the exact nature of the transaction are unavailable at this time.

Adding this new private cat bond to our market data and analytics, 2023 private catastrophe bond issuance has reached almost $411 million so far this year, according to Artemis’ extensive cat bond market data.

You can analyse private cat bond issuance by year in our chart that breaks down all our tracked issuance by type here. Click on the chart below to access an interactive version:

Issuance of private catastrophe bonds has been slow through much of 2023, but picked up in recent months and could now be on-track to close on last year’s levels.

2021 remains the record year for private cat bonds, with over $1 billion of issuance recorded by Artemis.

Read more about this new LI Re (Series 2023-1) private catastrophe bond in our extensive cat bond Deal Directory.

You can filter our Deal Directory to view only private cat bond deals.