Private Catastrophe Bond Transaction of $5 Million: Reinsurance

By Insurance CIO Outlook | Friday, February 15, 2019

The insurance industry plays a vital role to dilute the effect of natural calamity. Natural calamities destroy the economic structure of a place and lead people to extreme poverty. Insurers use catastrophic reinsurance for cutting down the risks that come from the underwriting of new policies. According to the report of Summary of Natural Catastrophe Events 2018, insured losses from catastrophe was almost $71.5 billion.

AlphaCat Managers and Terra Brasis Resseguros S.A. have successfully completed a private catastrophe bond transaction of $5 million. AlphaCat Managers, Ltd is an investment adviser, and it manages capital for third parties. Previously, AlphaCat was a subsidiary of Validus Holdings, but it has been taken over by AIG. Recently, AlphaCat has announced a partnership with Ledger Capital Market, LLC. They are aimed to take insurance-linked security business to another level. Under this agreement, they are expected to lead the ILS market expansion. Ledger Capital Markets, LLC is a provider of insurance-linked securities that ensures the deployment of insurance technology. Ledger helps in securing insurance and reinsurance and assists in the expansion of the ILS market.

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Terra Brasis Resseguros S.A., based in Brazil, is operating in reinsurance, and it is focused on the Brazilian and Latin American market. Previously, it was reported that Terra Brasis was discussing a merger with Austral Re. This plan of this merger was aimed at forming a Brazilian reinsurer with almost $1.3 million of assets. This merger has the potential to meet Terra Brasis' goal of raising capital.

Alpha Terra Validus III is the third version of Alpha Terra Validus catastrophe bond to cover Latin American catastrophe risks. This latest transaction has been made through the White Rock Insurance. This is a zero coupon note arrangement. Under Alpha Terra Validus III, an amount of $5 million has been issued to provide one-year reinsurance protection to Terra Brasis.

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