Allianz on the completion of their Blue Danube Ltd. catastrophe bond

by Artemis on April 5, 2012

Insurer Allianz has issued a press release providing their thoughts on the recent completion of their Blue Danube Ltd. catastrophe bond deal. Blue Danube Ltd. provides Allianz with a fully collateralized source of cover for multiple perils on a per-occurrence basis using a modelled industry loss trigger for a three year period. Allianz is not a first time cat bond sponsor, we make it their eighth according to our cat bond Deal Directory, and Blue Danube goes some way to replacing the cover from their Blue Fin Ltd. Series 2 cat bond which matures this month.

As a long time sponsor of cat bonds and participant in the cat bond market Allianz are clearly showing their commitment to using all sources of catastrophe risk transfer available to them. With this latest deal they are also helping to broaden the market by issuing perils which are less common in cat bond deals, including Canadian earthquake risk and Caribbean and Mexican hurricane risks. That will have been well received by investors and other sponsors alike and we hope this deal spurs other transactions to broaden the scope of the market.

The press release from Allianz follows below.

Allianz places catastrophe bond through new Blue Danube program

  • First takedown under Blue Danube with a volume of USD 240 million
  • Catastrophe bond covers US, Caribbean, and Mexican hurricane as well as US and Canadian earthquake risks
  • Largest US catastrophe bond transaction sponsored by Allianz to date

The three-year term Series 2012 catastrophe bond was issued in two tranches of USD 120 million each by Blue Danube Ltd., a newly established Bermuda special purpose vehicle. It offers investors an interest spread of 6.00% and 10.75% over the permitted investments yield for the Class A and Class B notes, respectively. The Series 2012 bond protects Allianz against the risk of loss from certain hurricane events in the US, Caribbean, and Mexico as well as certain earthquake events in the US and Canada. The transaction is based on a modified industry loss trigger. The Class A notes have received a rating of “BB+ (SF)”, and the Class B notes a rating of “BB- (SF)” by Standard & Poor’s. Both tranches were significantly oversubscribed and upsized from the originally announced volume of USD 100 million per tranche.

The Blue Danube Series 2012 issuance partially replaces expiring cover under Allianz’ Blue Fin catastrophe bond program but also includes some new features. For example, through the addition of Canadian earthquake as well as Caribbean and Mexican hurricane risk, it protects risks which are not common in the insurance linked securities market.

“This expansion of perils protected through Blue Danube Series 2012 allows us to better fulfill our risk management requirements. It aligns the scope of the cat bond protection with other forms of cover Allianz regularly relies on,” says Olaf Novak, CRO of Allianz Re, the reinsurance division of Allianz SE, which is responsible for structuring the transaction for the Allianz Group.

Over the past 5 years, Allianz has returned regularly to the catastrophe bond market underlining its commitment to all markets for natural catastrophe protection.

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