Sector developments and company hires

Auto ILS closed

AlphaCat Managers has securitised a non-standard passenger auto insurance portfolio. “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. "The bilateral transaction comprises a private placement of two tranches of notes: a US$6.67m senior note and a US$3.33m junior note, which will pay ILS fund investors retained earnings after payments made to support the senior tranche under a profit-and-loss share agreement. 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. Ledger Capital Markets acted as the structurer and bookrunner on the deal.

ILS group formed

Guy Carpenter has formed a new global capital solutions group and announced a series of new leadership appointments related to the Jardine Lloyd Thompson Group (JLT) acquisition. The global capital solutions Group – comprising the Global Capital Solutions and GC Securities businesses - will be led by David Priebe, vice chairman of Guy Carpenter, and will work closely with the firm’s analytics, strategic advisory and broking teams. Ed Hochberg, ceo of North America at JLT Re, will head the Global Capital Solutions practice, advising clients on capital, reinsurance optimisation and risk transfer solutions. Shiv Kumar will continue as president of GC Securities, responsible for the ILS and M&A practices.

Securitised assets sold

Charter Court subsidiary, Charter Mortgages Limited, has agreed to sell its residual economic interest in the Precise Mortgage Funding 2018-1B and Precise Mortgage Funding 2018-2B securitisations to Merrill Lynch International (MLI) for cash consideration of £6m, payable on completion. The transaction, which is expected to complete on 23 January 2019, will involve the sale of the RC2 residual certificates to the securitisations. MLI managed the sale process and purchased the Certificates for onward sale. The transaction will generate a pre-tax gain of £30.3m, which will be recognised in the 2019 financial year. It will also result in a reduction in the gross assets of the group of around £584m and a reduction in risk weighted assets currently attributable to the securitised mortgages of around £197m. The associated increase in common equity tier 1 capital ratio through the reduction in risk weighted assets and the gain on sale will be reinvested to support new loan originations in Charter Court's specialist lending segments and ongoing business activities. During the period between the issuance of each instrument (24 January 2018 for PMF 2018-1B and 20 March 2018 for PMF 2018-2B) and 31 December 2018, the assets being disposed of contributed around £6.9m in profit before tax.