ILS Capital Management completes the first ever securitisation of trapped capital

ILS Capital Management has completed a $57 million offering of 5.50 percent asset-backed notes, a securitisation of the residual value of trust accounts supporting reinsurance contracts, or trapped capital.

The Bermuda-based asset manager, which specialises in insurance and reinsurance investments, issued the notes through its newly formed subsidiary, Parliament Street Finance.

This is the first-ever securitisation of trapped capital, investor funds that are temporarily held by counterparties and thus unavailable for reinvestment until insurance claims are settled. It includes 51 contracts potentially impacted by 18 catastrophe events spanning the past three years, and represents 70 percent of the total trapped capital across ILS Capital funds as of January 1, 2020.

According to ILS Capital there is around $15 billion of trapped capital, globally.

Tom Libassi, co-founder and managing partner of ILS Capital, said, "By unlocking capital that would otherwise be kept from being redeployed, this transaction gets money back into the hands of our investors more quickly, making it available for new investments while still providing our investors with potential upside."

Earlier this year, ILS Capital’s reinsurance company Prospero Re was given an A rating by Kroll Bond Rating Agency, making it the first Bermuda-based collateralised reinsurance company to be rated.

The transaction was marketed by BNP Paribas' debt private placements and asset-backed securities syndicate desks. It was placed with investors from global and regional asset managers and insurance companies.

ILS Capital was advised by BNP Paribas, which served as sole structuring advisor and sole placement agent. Goodwin Procter and ASW Law served as its legal advisors, while Mayer Brown provided legal counsel to the investors in the transaction.