Chartis on the completion of their Compass Re Ltd. catastrophe bond

by Artemis on December 6, 2011

Chartis, who recently completed the issuance of a $575m catastrophe bond through a Bermuda domiciled SPV Compass Re Ltd., have published a press release regarding the transaction. The deal for which the ultimate beneficiary would be National Union Fire Insurance Co. of Pittsburgh, a subsidiary of Chartis, is the third catastrophe bond from Chartis after they issued two Lodestone Re cat bonds last year.

Chartis managed to increase the size of the transaction considerably during the marketing phase from an initial $275m of protection to the completed $575m. The full press release from Chartis follows below.

Chartis Obtains $575 Million of Reinsurance Coverage; Fully Collateralized through Catastrophe Bond Issuance by Compass Re

NEW YORK – December 5, 2011 – Chartis today announced that it has entered into a reinsurance transaction with Compass Re, which will provide $575 million of protection to Chartis against U.S. hurricanes and earthquakes. This represents a substantial increase from the $275 million of protection originally sought by Chartis. To fund its obligations to Chartis, Compass Re issued a catastrophe bond in three tranches – $75 million of Class 1 notes, $250 million of Class 2 notes and $250 million of Class 3 notes.

The transaction closed on December 1, 2011 and provides Chartis with fully collateralized coverage against losses from U.S. hurricanes and earthquakes on a per-occurrence basis (under a reinsurance agreement related to the Class 1 notes) and a second and subsequent event aggregate basis (under reinsurance agreements related to the Class 2 and Class 3 notes) through December 2014 using an index trigger with state-specific payment factors. Risk analysis for the transaction is based on AIR Worldwide Corporation’s CATRADER Model Version 13.0. This transaction follows Chartis’ two reinsurance transactions with Lodestone Re in 2010, which provided a total of $875 million of protection to Chartis, fully collateralized through catastrophe bonds issued by Lodestone Re, against U.S. hurricanes and earthquakes.

Peter D. Hancock, Chief Executive Officer of Chartis, said, “We are pleased to be able to again obtain reinsurance supported by capital markets instruments as a mechanism to efficiently supplement and diversify Chartis’ risk management framework.”

Compass 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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