Blue Danube II Ltd. catastrophe bond comes to market for Allianz

by Artemis on April 24, 2013

Another new catastrophe bond has hit the market, according to sources, and this time it is another ‘Blue’ cat bond from a regular sponsor, German insurer Allianz. We make Blue Danube II Ltd. (Series 2013-1) the German insurers eighth visit to the cat bond market and likely a replacement for its soon to mature Blue Fin 3 cat bond. Blue Danube II sees Allianz looking for broad reinsurance protection for certain of its U.S., Caribbean and Central American hurricane and earthquake risks.

Blue Danube II Ltd. is a newly formed Bermuda domiciled special purpose insurer which is being established as a shelf program to allow for future cat bond note issuances. This first Series 2013-1 issuance will see a single tranche of notes issued with a preliminary size of $150m, although as with recent deals there’s a good chance that it will upsize before close.

With this cat bond Allianz is seeking a fully-collateralized source of multi-year reinsurance protection for certain hurricane and earthquake risks. According to our sources, cover for U.S. hurricanes is across all exposed Eastern and Gulf states while U.S. earthquake protection is across the entire U.S. The transaction also provides hurricane protection across the majority of the Caribbean and Central America, including Mexico.

The protection that Blue Danube II will provide through this issuance is on a per-occurrence basis we understand and using two types of modelled industry loss triggers. The transaction uses the Modelled Industry Trigger Transaction (MITT), which takes industry loss estimates for the U.S. and weights them after the event against certain applicable modelled portfolios, and also a standard modelled loss trigger depending on the region.

The MITT trigger, which is a trigger developed by reinsurer Swiss Re that was used in Allianz’s Blue Danube Ltd. cat bond last year, is for the domestic U.S. hurricane and earthquake risks. The modelled loss trigger is being used for the other regions that this cat bond covers for hurricane risks, so most of the Caribbean and certain Central American countries including Mexico.

We’re told that this transaction covers U.S. wind on a named storm basis and that PCS is being used for industry loss estimates. These are fed into the model to calculate index values on a modelled industry loss basis and using certain weighting factors for the MITT trigger perils and the calculation agent then determines whether an event has breached the modelled industry index trigger level. We’re told the coverage is for both personal and commercial line losses.

AIR Worldwide are providing risk analysis and calculation services for this transaction, with Property Claims Services (PCS) acting as the reporting agency. Swiss Re Capital Markets and GC Securities are both structuring and marketing the transaction.

That’s all the detail we have on this transaction for the moment but we hope to be able to bring you more as information becomes available and as the deal progresses to market. For now, Blue Danube II Ltd. (Series 2013-1) has been added to our catastrophe bond Deal Directory.

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