10 September 2016 Alternative Risk Transfer

MS Amlin and Leadenhall unveil two cat bonds

Re/insurer MS Amlin has launched two cat bonds, based on risks in funds managed by Leadenhall Capital Partners, in a bid to appeal to a wider set of clients.

Investment manager Leadenhall Capital Partners, which is 75 percent owned by MS Amlin, worked on the private cat bonds which have been given a BBB+ rating by S&P Global.

Leadenhall invests in segregated cells which accept reinsurance risk, some of which are then written by MS Amlin.

The bonds cover a small layer of the portfolio held in segregated cells that are used for the Value and the Diversified fund which Leadenhall manages.

The cat bond reinsurance will cover the cells’ obligations from an annual exceedance probability (AEP) level of 1 in 2,000 year.

Collateral is provided to meet claims up to the attachment point of the bonds and initially, some of the limit written above the cat bonds’ exhaustion will also be collateralised.

Leadenhall said it benefits from diversification of the underlying portfolio, which is made up of a large volume of small tranches of MS Amlin fronted deals with each one individually accepted by Horseshoe Re II as reinsurer and by LCP as investor.

Luca Albertini, Leadenhall chief executive officer, said: “One of the challenges for the convergence market is to find a way to come up with an equivalent to a credit rating for a cat portfolio based on its level of capitalisation.

“Whilst rating the reinsurance obligations of a cell could prove challenging, S&P’s cat bond criteria made it easier to come up with a comparison.”

James Few, MS Amlin’s global managing director, reinsurance, added: “This innovative move illustrates the diversity and skill we have within MS Amlin’s reinsurance business, it will help MS Amlin appeal to a broader set of clients in our global markets.”

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