AXA Global Life launches Benu Capital mortality catastrophe bond

AXA Global Life is seeking a source of fully-collateralized reinsurance coverage for excess mortality events from a catastrophe bond structure with a newly launched €250m transaction named Benu Capital Limited.

This is the first pure mortality cat bond since September 2013’s Atlas IX Capital from French reinsurer SCOR.

Benu Capital Limited, a newly formed Irish special purpose vehicle, will seek to issue two tranches of mortality linked notes totaling €250m in order to collateralize a reinsurance agreement with AXA Global Life.

The mortality bond notes will provide AXA Global Life with excess mortality protection for France, Japan and the U.S. over a five year period from January 2015 to the end of 2019, Artemis understands.

The Benu Capital mortality cat bond notes will be linked to a mortality index trigger, which is weighted by both age and gender within for each covered region. As a result, each region will have its own trigger point for each of the two tranches of excess mortality-linked notes.

The Benu Capital Class A notes, sized at €150m, will have an attachment probability of 1.06%, an exhaustion probability of 0.44% and an expected loss of 0.64%. These notes are being marketed with price guidance of 2.15% to 2.65%.

The Class A notes will trigger at a mortality index level of 116% for France, 116% for Japan and 108% in the U.S. The exhaustion points are 152.7% for France, 140.8% for Japan and 120.4% for the U.S.

These notes also feature a dropdown level for each region, set at 110% for France, 110% for Japan and 106% for the U.S. We understand they would dropdown if the coverage from the Class B tranche, which are riskier, was eroded or exhausted during the five year term of the deal.

The Class B notes are sized at €100m, have an attachment probability of 1.79%, an exhaustion probability of 1.04% and an expected loss of 1.33%. These notes are being marketed with price guidance of 2.9% to 3.5%.

The Class B notes will trigger at a mortality index level of 108.1% for France, 108.2% for Japan and 104.1% in the U.S. The exhaustion points are 116% for France, 116% for Japan and 108% for the U.S.

So Class B is the riskier of the two slices of excess mortality reinsurance protection. As with all excess mortality deals the key risks covered are pandemic or disease events, such as severe flu outbreaks and the like, but events such as war, earthquakes, terrorism etc are also modelled. Data to report mortality rates within each covered area are taken from the main government statistical reporting agencies.

The launch of a mortality catastrophe bond will likely be welcomed by some investors who have life ILS strategies or that seek diversification through life related ILS deals.

We’ll keep you updated as this mortality ILS transaction Benu Capital Limited comes to market and you can read all about it in the Artemis Deal Directory.