Platinum believe Japan earthquake to be an activation event for Topiary Capital Ltd. catastrophe bond

by Artemis on March 24, 2011

Platinum Underwriters have issued a statement regarding their catastrophe losses experienced so far during 2011 including some commentary about their exposure to the earthquake and tsunami in Japan. As we have written previously, Platinum Underwriters have a catastrophe bond, Topiary Capital Ltd., which could be activated by the Japanese earthquake.

After discussing the losses experienced due to the events earlier this year in Australia and New Zealand, Michael D. Price, President and Chief Executive Officer of Platinum, commented, “Despite the recent increased frequency of major natural catastrophes, we believe Platinum remains well capitalized and we continue participating selectively in the reinsurance marketplace. The recent disasters demonstrate the inherent volatility of business exposed to property catastrophes. Nevertheless, we believe that writing such business, when adequately priced, is an important element of our strategy for delivering attractive long term returns to shareholders.”

Mr. Price added, “We believe the Tohoku earthquake is an activation event under our contract with Topiary Capital Limited and that we now benefit from up to $200 million of collateralized retrocessional protection for certain catastrophe events that may occur prior to August 2011.”

As Topiary Capital is a second/subsequent event cat bond it offers reinsurance protection after the first qualifying event activates its cover. The transaction runs until August, so if it is activated Platinum gain an extra $200m of cover for U.S. hurricanes and earthquakes, European windstorms and additional Japanese earthquakes that qualify under the terms of the deal.

We’ll have to wait for the official word as to whether the Japanese earthquake does activate this cat bond once the risk calculation is complete.

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