Investment manager Twelve Capital has issued a third private catastrophe bond.
Dodeka IV is a $28 million zero-coupon cat bond that expires on December 15, 2014, and covers wind risk in the US for an unnamed sponsor.
Dodeka IV comprises of two tranches. The first tranche covers losses due to wind events in Florida, the second covers losses due to wind events in the US federal states around Gulf of Mexico.
Twelve Capital believes that the second tranche offers a particularly interesting risk within the cat bond universe, as there are few bonds focusing on the Gulf of Mexico States.
The trigger of the transaction is based on predefined levels of market losses being exceeded.
“We anticipate a sound pipeline of private Catastrophe Bonds, as there are plenty of insurance-risk opportunities that can be transferred into note format” says Roman Muraviev, director at Twelve Capital.
The investment manager said that this type of risk has so far been covered by Industry Loss Warranty (ILW) transactions in bond format only. It believes that the transformation method itself can support various risk and trigger types that would assist Twelve Capital to broaden its liquid investment offering.
“Now that the platform becomes more established, in future issuances we will consider converting more complex risks, including indemnity triggered covers, to Dodeka format, in order to continue to provide investors with access to the best quality peak and select diversifying risks,” added John Butler, partner and head of sourcing.
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Twelve Capital, Europe, Cat Bond, Dodeka IV, North America