A smaller catastrophe note issued on light documentation, placed with a few investors and not traded.
A private cat bond, often called a cat bond lite, keeps the architecture of the classical catastrophe note, dedicated vehicle and full collateral, but with standardized light documentation, no full offering circular and no rating, placed with a small number of investors who hold to maturity. The problem it solves is the access threshold: the fixed costs of a public issue effectively rule out deals below a hundred million or so, which closed the capital markets to mid-sized cedants, niche perils and experimental structures. The private format lowers that threshold to a few tens of millions and cuts execution from months to weeks. The trade-off is no liquidity and less transparency, so that it pays in spread what it saves in fees. It often serves as a test bench: a cedant tries a structure or a new peril there before taking it, if it works, to the public market.
A regional mutual issues a 28 million euro private note on hail risk in 2026, a structure no public investor would have analyzed at that size. The spread comes out at 8.9 percent for an expected loss of 2.2 percent, a multiple of 4, against about 3.1 for a comparable public format. Two years later, the structure having proved itself, it is taken to 144A for 120 million.
Private cat bond, Cat bond lite, Titre catastrophe privé, Private ILS note