Oxbridge Re’s sidecar may have been dented by hurricane Ian

It appears that investors in the collateralized reinsurance sidecar vehicle of Oxbridge Re Ltd., the Cayman Islands based reinsurance firm, may support the insurers’ losses from hurricane Ian, as their share of income from the vehicle was recorded as zero for the third-quarter.

Oxbridge Re’s reinsurance sidecar is one of the smallest in the market, at only $216,000 of capital for its latest and current arrangement, but it has historically delivered impressive returns to investors.

Oxbridge Re’s sidecar vehicle, Oxbridge Re NS, brings aligned retrocessional reinsurance capacity from capital market investors to support Oxbridge Re’s underwriting.

It’s leveraged as a platform through which Oxbridge Re can earn some fee income and build its expertise in managing third-party reinsurance capital at the same time.

Investors in the 2019 issue of the sidecar earned themselves a very impressive 36% return, while the 20/21 vintage sidecar deal returned investors around 17%, it was reported by the company.

That 2020 vintage deal, saw Oxbridge Re renewing its fully-collateralised reinsurance sidecar Oxbridge Re NS at a downsized $216,000, to run across a three-year term.

That sidecar vintage is still on-risk and had been running clean we believe, but it seems hurricane Ian might have ended that.

It’s important to say that no disclosure has been made, on Ian losses attributable to the sidecar, but given the third-quarter of 2022 saw zero income delivered to the investors in the structure, it seems possible that Oxbridge Re ceded some losses to it via the quota share reinsurance arrangement that is in place.

In the second-quarter of this year, Oxbridge Re reported that income attributable to participating noteholders in the Oxbridge Re NS sidecar had reached $16,000 for the three month period.

But, for the third-quarter of 2022, that income attributable to investors in the reinsurance sidecar has been reported as zero.

In the prior year’s Q3 period, investors received $24,000 of income from the sidecar.

As a result, it appears that something has erased the sidecar investor income for the third-quarter of 2022, which given Oxbridge Re has suffered losses due to hurricane Ian, suggests there is a good chance Ian was the driver.

Oxbridge Re CEO Jay Madhu had said, “Our resolve to limiting our exposure to underwriting losses through reinsurance contracts this year, helped significantly in lowering the potential loss caused by the catastrophic damage from Hurricane Ian and Hurricane Nicole.”

But the company revealed that two of the reinsurance contracts it had underwritten suffered “a limit loss” due to hurricane Ian in Q3, which accelerated the recognition of premium related to the contracts. But an increase in the Oxbridge Re loss ratio for Q3 to 181.6% drove the company to a net loss for the period, despite retro reinsurance support.

Oxbridge Re’s combined ratio hit a huge 247.2% for the third-quarter, at which level it seems unlikely the sidecar could have been untouched, as you’d certainly imagine that level of combined ratio would mean a cession of at least some losses to the vehicle via its quota share arrangement.

While the income earned by investors in Oxbridge Re’s sidecar was down to zero for the third-quarter, for the nine months to September 30th 2022 it was still running at $43,000, albeit lower than the prior year’s $66,000 at that stage of 2021.

It appears hurricane Ian may have taken a toll on Q3 income for the sidecar investors, but that is to be expected given the losses suffered by Oxbridge Re from the storm.

It is only small, but Oxbridge Re’s sidecar has proven valuable to the company so far, as a way to begin working with third-party capital and also as a source of aligned retrocessional reinsurance capacity.

Hurricane Ian’s impacts may have seen the sidecar prove its worth to the company again.

View details of many reinsurance sidecar transactions in our directory.