GC / MMC’s Isosceles ILS platform in $25m private cat bond issuance

Isosceles Insurance Limited, the transformer and segregated cell structure operated by Marsh & McLennan Companies and reinsurance broker Guy Carpenter to issue privately placed insurance-linked securities or catastrophe bonds has completed issuance of another transaction.

This $25 million Isosceles Insurance Ltd. (Series 2020-C1) transaction is the second deal to come to light from the issuance platform.

The Isosceles Insurance (or Isosceles Re) platform was set up in early 2020 as a new private ILS and private cat bond (or cat bond lite) issuance platform, as the broking group looked to put to use a rent-a-captive structure it had inherited when MMC acquired JLT.

The Isosceles structure issues 4(2) or 4(a)(2) securities, which are private placements and so can include privately placed catastrophe bonds, insurance-linked securities (ILS) and the securitisation of other transformed collateralised reinsurance arrangements.

For this latest transaction from the platform, Isosceles Insurance Limited has issued a single $25 million tranche of Series 2020-C1 ILS notes, which have been privately placed with qualified investors.

As is typically the case with a private ILS or private catastrophe bond arrangements, we don’t have all the details on the underlying protection so we’ve had to make some assumptions in order to include this Isosceles private ILS transaction it in our catastrophe bond Deal Directory.

The $25 million of Series 2020-C1 notes issued by Isosceles Insurance Ltd. for this transaction are structured as discounted zero coupon notes, typical of a private ILS transformation of a collateralised reinsurance or retrocession contract, converting it into something more liquid and investable as a security.

The notes have a maturity date of August 5th 2021, suggesting the underlying contract likely runs for about a year.

As a result, we assume this issuance may be linked to the mid-year renewals and likely features property catastrophe reinsurance or retrocession risks that have been transformed in order to provide an ILS fund or investor with an asset that meets a catastrophe bond mandate, while offering greater options in terms of secondary liquidity.

These private ILS or cat bond lite arrangements typically either feature risks from a primary insurance carrier being subject to a collateralised reinsurance agreement that is then transformed and securitised, to either be assumed by a single ILS fund or investor, or a small group of funds/investors.

Another use-case might be ILS fund-to-fund transactions, retrocession placement transformation, or the transformation of a specific arrangement such as an industry-loss warranty (ILW).

It’s not possible to understand if this was a bilateral agreement featuring a single ILS fund or investor, or a privately placed transaction that was marketed to a number of investors and funds.

It’s assumed that reinsurance broker Guy Carpenter’s capital markets unit GC Securities has assisted with structuring and acting as a bookrunner, where needed, for this Isosceles Insurance Ltd. private ILS transaction. While also assumed that Marsh Management Services will have acted as the insurance manager.

While this is only the second transaction from the Isosceles Re platform that we’ve seen, there are likely to be others more privately placed that we don’t get to hear of.

In June the first private ILS deal from the platform came to light, a $16.5 million Isosceles Insurance Ltd. (Series 2020-A1) arrangement.

We haven’t seen any sign of a Series 2020-B1 deal.

We’ve added this Isosceles Insurance Ltd. (Series 2020-C1) private ILS or private catastrophe bond transaction in our extensive Deal Directory.