Allianz announces completion of Blue Fin 4, confirms commitment to catastrophe bond market

by Artemis on April 19, 2011

Allianz has issued a press release announcing the completion of the fourth takedown under their Blue Fin Ltd. catastrophe bond program (as we wrote yesterday). The $40m cat bond deal provides Allianz with capital markets cover for U.S. hurricane and earthquake events using a modeled loss trigger mechanism until May 2013.

The full press release can be found further down this article but here are some of the details of this deal from Allianz.

The notes issued in this Series 4 Blue Fin Ltd. cat bond issuance offer investors a coupon of 8.5% above U.S. Treasury money market funds. Allianz Re, the reinsurance division of Allianz SE, structured the transaction. Allianz say the new series of notes provide them with cover at similar rates as traditional reinsurance which the market and potential issuers will be pleased to hear. Allianz say this is their sixth cat bond transaction since 2007; the deals they’ve issued are Blue Wings, Blue Fin Series 1, Blue Fin Series 2, Blue Fin Series 3, Blue Fin Series 4 and Blue Coast (details of these can be found in our Deal Directory).

Olaf Novak, CRO of Allianz Re said; “The Blue Fin shelf program enables Allianz to efficiently complement our reinsurance program with non-traditional protection elements on a regular basis. The existing infrastructure has allowed to optimize both lead-time and cost and facilitated the decision to buy more term-aggregate protection”.

As well as announcing the completion of their latest cat bond transaction today, Allianz have published an interview with Olaf Novak (available in full here) which confirms their commitment to the cat bond market and explains their rationale for using the capital markets as a source of reinsurance risk transfer.

In the interview Mr. Novak is asked whether Allianz plans further cat bond transactions in the future, to which he says “Allianz is dedicated to this market segment and intends to issue a bond from time to time. This is also in line with our overall risk management strategy to have a well diversified reinsurance portfolio”.

He also says that he see’s the market as ‘rather stable for the time being’ but add’s that the events in Japan and their impact on cat bonds needs to be monitored and that they need to watch closely to see what the RMS hurricane risk model update means for the market.

Repeat issuers like Allianz are becoming sophisticated users of catastrophe bonds as part of their risk management and reinsurance mix. They see the value in having a well diversified portfolio of reinsurance sources and it’s encouraging to see them affirm their commitment to the market.

The full press release announcing the completion of Blue Fin Ltd. Series 4 from Allianz is below:

Allianz closes US catastrophe bond

Allianz successfully closes new catastrophe bond covering US hurricane and earthquake risks / Fourth takedown under the Blue Fin program with an issuance size of $40 million / Allianz continues natural catastrophe protection strategy via capital markets

Allianz SE
Munich, Apr 19, 2011

The new Series 4 catastrophe bond securities (“cat bond”) issued by Blue Fin Ltd. are denominated in US dollars and offer investors a coupon of 8.50 percent above the yield of US Treasury money market funds. Like the Series 3 Class B securities issued in 2010, the Series 4 cat bonds transfer to investors the risk of losses from hurricane and earthquake events in the US based on an modeled loss trigger mechanism, and are scheduled to be redeemed in May 2013. As with previous cat bonds under the Blue Fin program, Allianz Re, the reinsurance division of Allianz SE, is responsible for structuring the new transaction.

Capital markets have developed to represent a considerable source of complementary protection for US perils. “The occurrence of the March 11 Japanese earthquake and tsunami was a test for the ILS market, which proved to be in good shape and is fully functioning. As a repeat sponsor, consistency is a crucial market feature for us”, explains Clemens von Weichs, CEO of Allianz Re.

The new Blue Fin Series 4 cat bond provides multi-year protection at similar rates as traditional reinsurance from a diversifying source on a fully collateralized basis. The new tranche is structured to provide protection against combinations of medium-sized and large events. “The Blue Fin shelf program enables Allianz to efficiently complement our reinsurance program with non-traditional protection elements on a regular basis. The existing infrastructure has allowed to optimize both lead-time and cost and facilitated the decision to buy more term-aggregate protection”, says Olaf Novak, the CRO of Allianz Re.

Since 2007 Allianz regularly returned to the capital markets by sponsoring a total of six cat bond transactions with a total volume of approximately $900 million: Blue Wings, Blue Fin Series 1, Blue Fin Series 2, Blue Fin Series 3, Blue Fin Series 4 and Blue Coast.

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