13 June 2013ILS

TMR and GC launch cat bond platform

Tokio Solution Management and GC Securities have collaborated to launch Tokio Tensai Platform, a platform the companies are hailing as a more efficient platform for the funding of excess of loss catastrophe reinsurance for the capital markets.

The platform, the name for which translates to “Genius” and “Act of God”, provides capital market access to reinsurance buyers whose capacity needs are below the threshold amount needed to justify a traditional Rule 144A catastrophe bond issuance, Chi Hum, managing director at GC Securities, indicated.

Hum continued: “the advantages of capital markets capacity previously available only to the largest of capacity buyers will now be made available to a broader client segment.” He told Bermuda:Re: “the current issuance process for 144a cat bonds incur a level of costs that need sufficient issuance size, generally from $75 to $100 million, in order to justify the transaction. We expect that under the Tokio Tensai Platform that a deal size as small as $25 million could be accommodated. This will facilitate capital markets access to smaller buyers of re/insurance protection.”

Tokio Tensai is said to “significantly reduce the time and cost” of sponsoring a cat bond; in addition, the product allows clients to customise coverage along a range of triggers and reinsurance structures while in keeping with the low cost approach. Tokio provides clients the opportunity to sponsor cat bonds through Shima Re, while GC Securities serves as the placement agent.

Hum and Jay Green of GC Securities told Bermuda:Re: “this collaborative effort is the result of ongoing discussions between business leaders at GC Securities and Tokio Solutions, evaluating the overall activity of capital markets participants in the re/insurance markets and assessing what changes could possibly facilitate a larger market. This project focused specifically on facilitating access to the capital markets capacity for smaller issuance amounts which are currently uneconomic due to various frictional costs.”   

Kathleen Faries, CEO of Tokio Solution said: “Tokio Solution is thrilled to introduce the Tokio Tensai Platform as an alternative to the traditional Rule 144A offering process. We are committed to using our experience and strength within the Tokio Millennium Re Group to bring innovative products and services across the full spectrum of the convergence market.”