Recent $45.4m Randolph Re issuance is first cat bond issued by a Guernsey PCC

Back on July 10th we reported on a new $45.5 million Randolph Re (Series 2024-1) private catastrophe bond that appeared to be a renewal of a wildfire transaction for Mercury Insurance and for the first time Aon had used its Guernsey based protected cell company White Rock Insurance Company PCC Limited for the issuance.

One item we failed to highlight when we revealed the transaction, was that while this is one of only a few catastrophe bond like insurance-linked securities (ILS) arrangements ever issued out of Guernsey, it turns out this was the first time a Guernsey PCC company had been used to issue a cat bond.

Previously, the Red Cross’ volcanic risk parametric catastrophe bond had been issued out of Guernsey, but that used an incorporated cell structure, Dunant Re IC.

Other cat bond like issuances have tended to also come from IC structures on the island in the past and while we understand there have been some collateralised reinsurance arrangements that used the PCC structure, none of these had been fully-transformed into a cat bond securitization.

Discussing the recent Randolph Re private wildfire cat bond transaction, Guernsey Finance noted that, “This new series 2024-1 private cat bond marks the first time a catastrophe bond has been issued using a Guernsey PCC structure.”

Carey Olsen’s corporate legal team in Guernsey advised on the issuance and partner Christopher Anderson commented, “The delivery of Randolph Re’s latest private cat bond via a Guernsey protected cell company for the very first time is a groundbreaking moment for Guernsey’s insurance industry.

“It showcases both the benefits of structuring ILS transactions through Guernsey and Aon’s ability to broaden its reach to multiple jurisdictions.”

Previously, Aon’s White Rock private cat bonds under the Randolph Re program had all been issued out of Bermuda. Of course that Bermuda SAC structure has become involved through no fault of its own in the Vesttoo saga, which may also have been a driver to look elsewhere and use the optionality that Guernsey offers.

But this is a positive for Guernsey, in providing a good demonstration that its protected cell company (PCC) structure is fit for purpose for the catastrophe bond market, which could lead to other issuances there.

Guernsey has previously been a home to a relatively significant amount of collateralised reinsurance activity for European headquartered ILS funds. With that segment also beginning to grow again, it will be interesting to see whether activity resumes there for Guernsey as well.

Guernsey Finance Chief Executive Rupert Pleasant also commented, “As the effects of climate change continue to intensify, it is imperative that financial centres such as Guernsey continue to put our expertise to good use to provide insurance cover for emerging climate risks.

“Guernsey is becoming the go-to jurisdiction for providing innovative solutions to manage and insure catastrophe bonds, following earlier work with the Danish Red Cross and IFRC.”

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.