Aon Benfield Securities, the capital markets unit of the reinsurance broker, has announced its role in what it calls the streamlined issuance of the first European windstorm catastrophe bond to use an indemnity trigger, the Windmill I Re Ltd. transaction.
Artemis first revealed the Windmill I Re transaction in December. The transaction saw Dutch group reinsurer Achmea Reinsurance Company, part of the Dutch Achmea Group insurance and reinsurance operations, sponsoring its first catastrophe bond with the assistance of Aon Benfield Securities.
The cat bond provides Achmea Reinsurance Company with €40m of fully-collateralized reinsurance protection for European windstorm risks on an indemnity trigger basis over a three-year risk period which began on the 1st January and runs to the end of December 2016.
According to the update from Aon Benfield Securities, the covered area for the transaction is the Netherlands, Belgium, France, Germany, Portugal, Spain and the UK. It is predominantly Dutch windstorm cover however, as the other countries make up a very small contribution to the cat bonds expected loss.
The cedent was Achmea Reinsurance Company NV who ceded risk from the Achmea group Dutch non-life companies property portfolios to Windmill I Re where the risk was transformed and issued as securities to be sold to investors.
The €40m Windmill I Re Ltd. Series 2013-1 Class A Principal At-Risk Variable Rate Notes were priced at 3.25% above the return on the underlying money market fund collateral.
Aon Benfield Securities acted as both Structuring Agent and Placement Agent for the Windmill I Re cat bond and helped Achmea to reduce its costs as sponsor by streamlining the issuance in a number of ways.
To reduce costs on the transaction Aon Benfield Analytics provided risk modelling and will be the reset agent for the cat bond which removed the need for a third-party modelling firm. The underlying collateral for the transaction was invested in Euro-denominated government money market funds, which further streamlined the issuance according to Aon. Also, the notes were not submitted for rating, further reducing frictional costs for the sponsor.
Roelant de Haas, Chairman of the Board of Directors at Achmea Reinsurance Company NV, commented on the transaction; “We are very happy with the coverage secured via Windmill I Re Ltd., the first catastrophe bond sponsored by our company. It is not only our first catastrophe bond but it is also indemnity based which was one of our conditions. This catastrophe bond received strong investor interest and provided our firm with AAA rated collateralized reinsurance protection at very efficient terms for a three-year period.”
Paul Schultz, Chief Executive Officer of Aon Benfield Securities, said; “The objective of this transaction was to secure efficiently-priced capital on terms substantially similar to the traditional reinsurance market. The streamlined offering also makes catastrophe bonds available in smaller notional sizes on an economical basis.”
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