AlphaCat strikes new ILS deal with Ledger Capital Markets

AlphaCat Managers, AIG's third-party reinsurance capital management and insurance-linked securities (ILS) unit, has entered into an ILS transaction with Ledger Capital Markets.

Ledger Capital Markets is the broker-dealer entity of Ledger Investing, an insurtech and ILS startup.

The transaction relates to the direct securitization of a non-standard passenger auto insurance portfolio. This is the first transaction where Ledger is acting as the structurer and bookrunner for a bilateral ILS transaction between a managing general agent (MGA) and ILS fund, according to the corporate statement.

The deal includes a private placement of two tranches of notes amounting to $10 million, including a $6.67 million senior note. The $3.33 million junior note will pay ILS fund investors retained earnings after payments made to support the senior tranche.

The junior tranche will act as a profit and loss share with the MGA. The funding for both notes is variable with just-in-time capital contributions designed to closely match any increase in risk as the underlying auto insurance portfolio grows.

"We’re pleased to lead the ILS market expansion beyond property catastrophe and reinsurance sourced risks," said Lixin Zeng, CEO of AlphaCat. "This facility’s novel structure enables MGAs to upsize more nimbly and AlphaCat to deploy our clients’ capital more efficiently.”

Samir Shah, CEO of Ledger Investing, added: "This innovative transaction creates new ILS market opportunities in securitizing broader classes of insurance risk. We look forward to working with more MGAs and insurers.”