QBE ‘very happy’ with first Australian indemnity cat bond, VenTerra Re

by Artemis on January 8, 2014

Australian insurer QBE Insurance Group is ‘very happy’ with the successful completion of what is the first ever catastrophe bond to provide reinsurance cover for Australian perils on an indemnity basis, the $250m VenTerra Re Ltd. (Series 2013-1).

The VenTerra Re catastrophe bond completed just before the New Year, adding its $250m of risk capital to the 2013 cat bond issuance volume tally.

The cat bond provides QBE with a $250m three-year source of risk transfer via a fully-collateralized reinsurance agreement on an indemnity and per-occurrence basis for losses from earthquakes in the U.S. and Australia and tropical cyclones in Australia.

Jim Fiore, Chief Reinsurance Officer at QBE, commented on the completion of VenTerra Re; “We are very happy with the coverage and terms secured via VenTerra Re Ltd., the first catastrophe bond sponsored by our company and which was received very well among investors.”

Aon Benfield Securities said that it had successfully underwritten and placed the $250 million catastrophe bond issued by VenTerra Re Ltd, a Bermuda domiciled special purpose vehicle, acting as a joint structuring agent and the sole bookrunner for the deal.

VenTerra Re is the first-ever catastrophe bond to secure coverage for Australia perils for a primary insurer on an indemnity basis, said ABS. The notes were priced with a coupon to investors of 3.75% above the yield on the underlying money market fund collateral.

Paul Schultz, Chief Executive Officer of Aon Benfield Securities, commented; “We are pleased to have successfully placed VenTerra Re Ltd. on terms attractive to QBE, with coverage substantially similar to what QBE has been able to secure in the traditional reinsurance market.  VenTerra Re Ltd. was very well received by investors, who welcomed the addition of a new sponsor to the market.”

Catastrophe risk modelling firm RMS said that it was selected to provide risk analysis for VenTerra Re due to its industry leading Australian risk models and its experience modeling industrial and commercial risks using its unique Industrial Facilities Model, which is calibrated with billions of dollars of global claims data.

RMS used its North America Earthquake Model, and for the first time for this type of deal its Australia Earthquake model and Australia Cyclone model, to facilitate the risk analysis required for this cat bond.

“We are proud to have partnered with QBE on this innovative and highly successful transaction,” said Peter Nakada, managing director of RMS capital markets. “The strong support from investors demonstrates the market’s confidence in QBE’s cat management and underwriting, as well as in RMS’ global modeling capabilities across all risk types, including commercial and industrial risks.

“We are delighted that the RMS models and QBE’s use of RMS models for cat management contributed to the speed and efficiency of this transaction.”

Read more about the VenTerra Re Ltd. (Series 2013-1) catastrophe bond in our catastrophe bond and ILS Deal Directory.

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