Jardine Lloyd Thompson Capital Markets, part of reinsurance broker JLT Towers Re, has completed its third offering of catastrophe bonds on a new platform designed to make the capital markets more accessible to issuers looking to do smaller deals.
In a press release published Monday, the reinsurance broker said that it closed on the $30 million Market Re 2014-4, which provides two years of collateralized catastrophe coverage for North American earthquake exposure for an unnamed cedant.
The trust issued two tranches of notes, the $22 million class A and the $8 million class B. Both have a coupon of 4%, a spokeswoman confirmed.
Catastrophe bonds allow insurance companies to transfer some of the risks of damage claims to capital markets investors. Proceeds are placed in a trust and can be used by sponsors to help pay claims if certain triggers are met. The market has been growing rapidly, pushing down the cost of more traditional forms of reinsurance.
In the first half of 2014, issuance of cat bonds and other forms of insurance-linked securities totaled a record $5.90 billion, approximately 35% ahead of the previous record of $4.34 billion in the first half of 2007, according to Swiss Re. For the third year in a row,new issuance outpaced maturities, pushing the size of the cat bond market to $22.0 billion.
While investor demand has allowed insurers to place deals of several hundreds of millions of dollars, Jardine Lloyd Thomson Capital Markets’ platform caters to smaller deals.
“We continue to see the momentum of deals increasing. Both cedants and investors are recognizing the opportunity and value of transacting via cat bonds,” Michael Popkin, managing director and co-head of insurance-linked securities at Jardine Lloyd Thompson Capital Markets, said in the press release.
The firm has completed two prior transactions under the Market Re program, the $10 million Market Re 2014-1 and the $31.825 million Market Re 2014-2. The Market Re 2014-3 transaction has yet to be completed.