More details on the World Bank – CCRIF catastrophe bond issuance

by Artemis on June 27, 2014

We’ve sourced some further details on the $30m Caribbean hurricane and earthquake linked catastrophe bond transaction issued by the World Bank on behalf of the Caribbean Catastrophe Risk Insurance Facility (CCRIF).

As we wrote earlier today, it emerged that the World Bank has issued a $30m catastrophe bond transaction for the CCRIF, to provide it with a fully-collateralized source of reinsurance protection against hurricanes and earthquakes impacting its 16 member island nations. The deal provides three years of protection to the CCRIF.

According to our sources, this is not a typical catastrophe bond issuance. No special purpose insurer has been used as an issuing vehicle, as would be more typical of a cat bond deal. The World Bank’s Treasury unit has its own bond issuance platform, the Global Debt Issuance Facility and these catastrophe linked notes have been issued directly by the World Bank as a series of unsecured general obligation bonds, we understand.

So this places us with the difficulty of not having a naming convention for this transaction, despite them really being catastrophe bond notes, as we normally name cat bonds using the SPI. We’re going out on a limb and choosing to name this deal, for the purposes of getting it included in our Deal Directory, World Bank – CCRIF 2014-1.

The World Bank CCRIF 2014 issuance of catastrophe linked notes was, we understand, structured by both Guy Carpenter’s capital markets unit GC Securities and global reinsurance firm Munich Re, taking the roles of co-structuring agents. GC Securities also placed these notes, acting as sole placement agent for the transaction.

As we suspected the trigger is now confirmed as a parametric modelled loss arrangement, the same as the underlying trigger for the CCRIF’s reinsurance program. The $30m of cover is assumed to be the same layer of the reinsurance program which was previously transferred to the capital markets in a catastrophe swap form. The catastrophe bond, or notes, can be triggered on an annual aggregate basis, so provide protection for losses from multiple events as well as a single large event. We do not have attachment probabilities at this time.

We understand that the notes have been issued in such a way as to be transferable in the secondary market, meaning they can have liquidity and the investors holding them will be able to sell them through secondary broking desks.

That’s all we have in the way of additional information on the transaction for now, but we hope to have more in the coming days as statements emerge from parties involved in the deal.

We’ve added the World Bank – CCRIF 2014-1 catastrophe bond (or catastrophe linked notes) to the Artemis Deal Directory and all the details on the transaction will be updated there as more comes to light.

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