New $400m Compass Re catastrophe bond takes 2012 issuance over $6 billion

by Artemis on December 31, 2012

The volume of catastrophe bonds and insurance-linked securities issued in 2012 and listed in our Deal Directory has been helped over the magic $6 billion mark by a late-comer in the form of the second Compass Re Ltd. cat bond sponsored by American International Group (AIG) (was Chartis) subsidiary National Union Fire Insurance Co. of Pittsburgh. Compass Re Ltd. (Series 2012-1) completed last week bringing an extra $400m of risk into the cat bond market and taking the total issuance for 2012 to a very impressive $6.339 billion.

The first Compass Re Ltd. cat bond was issued at the end of 2011, giving ceding insurer National Union Fire Insurance Company of Pittsburg and affiliates a $575m source of fully-collateralized reinsurance cover for U.S. hurricane and U.S. earthquake risks. That first Compass Re deal was issued under the Chartis brand, but as of November 2012 Chartis’ P&C operations have moved back to use the AIG corporate branding. This Series 2012-1 issuance bumps that cover up by another $400m as it also covers U.S. hurricane and quake risks, taking the total Compass Re capital market sourced cat bond cover to $975m.

The single tranche of $400m Series 2012-1 Class 1 notes provide cover for approximately two years, with their maturity scheduled for 8th January 2015. Aon Benfield Securities are the sole structuring agent and sole bookrunner for this deal. Compass Re Ltd. is a Bermuda exempted company licensed as a special purpose insurer. The Compass Re Ltd. 2012-1 cat bond notes were admitted for listing on the Bermuda Stock Exchange on the 27th December.

This cat bond deal from AIG has not been widely publicised and we’ve seen no details from any rating agency, so the notes may remain unrated. We hope to be able to bring you more details on the structure of Compass Re 2012 in the near future.

We’ve added Compass Re Ltd. (Series 2012-1) to our catastrophe bond Deal Directory and will update the information there as and when more details become available.

Update: This cat bond uses a PCS industry loss index based trigger we’re told by sources.

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