With new Compass Re AIG has now sponsored $1.85 billion in catastrophe bonds

by Artemis on January 9, 2013

AIG, the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc., has now sponsored $1.85 billion worth of catastrophe bonds in the last three years. The recent completion, just before the end of the year, of the $400m Compass Re Ltd. (Series 2012-1) helped it to achieve this total. A press release issued by AIG today reveals a little more detail on the cat bond which was not widely publicised prior to issuance.

AIG entered into a reinsurance agreement with Compass Re Ltd. to provide their subsidiary National Union Fire Insurance Co. of Pittsburgh with a source of fully collateralized reinsurance protection against U.S. hurricanes and earthquakes. To fund its obligations under the reinsurance agreement, Compass Re sold a $400m cat bond in a single tranche to capital markets investors.

The deal closed on the 27th December, as we reported at the time. The protection AIG receives from this Compass Re 2012-1 cat bond is on a per-occurrence basis and runs for two years until December 2014. The transaction trigger, which we knew was a PCS industry loss index trigger, uses state-specific payment factors.

With the completion of this deal AIG has now sponsored $1.85 billion of cat bond transactions in the last three years, which it said enhances its role as a leader in the catastrophe bond marketplace.

Compass Re Ltd., a Bermuda domiciled special purpose insurer, is set up as a program allowing AIG to issue further tranches of cat bond notes in the future should it choose to.

AIG’s four cat bond transactions which add up to the $1.85 billion issued during the last three years are:

Compass Re Ltd. (Series 2012-1) – $400m

Compass Re Ltd. (Series 2011-1) – $575m

Lodestone Re Ltd. (Series 2010-2) – $450m

Lodestone Re Ltd. (Series 2010-1) – $425m

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