State Farm preparing Merna Re II earthquake catastrophe bond

by Artemis on March 19, 2010

State Farm is planning a new catastrophe bond issue. Merna Re II Ltd. is designed to provide State Farm with protection against some of it’s earthquake risks in the U.S. The deals initial size is said to be $400m but people close to the deal believe it could almost double and actually come to market closer to the $700m mark.

Merna Reinsurance II Ltd. was incorporated on the 26th of February in Bermuda as a special purpose vehicle for the transaction. State Farm’s 2007 $1.2B Merna Re deal is due to mature in June this year so this new transaction is seen as a replacement for some of the cover that provided them. No losses at all have been experienced by the original Merna Re deal.

Business Insurance reports that the new Merna Re II deal is said to be structured on an indemnity trigger basis.

Merna Re II is expected to be completed in April and will be the third deal of 2010. We’ve added the initial information to our Deal Directory and it will be updated as more details become available.

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