Chartis completes $425m Lodestone Re Ltd. catastrophe bond

by Artemis on May 22, 2010

Chartis has announced the completion of its first catastrophe bond issue, Lodestone Re Ltd. The deal completed significantly bigger than it’s initial $250m size and has resulted in Chartis obtaining $425m of  fully collteralized cover against losses from U.S. hurricanes and earthquakes until May 2013.

Investor demand has again been high for U.S. hurricane risk right before the start of the Atlantic tropical storm season. This bond uses a trigger with state specific payment factors on a per-occurrence basis which helps to make it more transparent (and understandable) to investors.

The full press release from Chartis is below and details on the transaction are in our catastrophe bond Deal Directory.

Chartis Obtains $425 million of Reinsurance Coverage; Fully Collateralized through Catastrophe Bond Issuance by Lodestone Re

NEW YORK – May 13, 2010 – Chartis today announced that it has entered into a reinsurance transaction with Lodestone Re, which will provide $425 million of protection to Chartis against U.S. hurricanes and earthquakes. This represents a substantial increase from the $250 million of protection originally sought by Chartis. To fund its obligations to Chartis, Lodestone Re issued a catastrophe bond in two tranches – $175 million of Class A notes and $250 million of Class B notes.

The transaction closed on May 12, 2010 and provides Chartis with fully collateralized coverage against losses from U.S. hurricanes and earthquakes on a per-occurrence basis until May 2013 using an index trigger with state-specific payment factors. Risk analysis for the transaction is based on Risk Management Solution’s (RMS) Hurricane Model Version 9.0 and RMS North America Earthquake Model Version 9.0.

Kristian P. Moor, President and Chief Executive Officer of Chartis, said, “As part of our first effort to obtain reinsurance coverage supported by capital market instruments, this transaction represents another important milestone in Chartis’ pursuit of increasing financial flexibility and enhancing our risk management capabilities.”

Lodestone Re is a special purpose insurer, incorporated under the laws of Bermuda, which has established a program structure enabling potential future catastrophe bond issuances.

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