Azzurro Re I Limited

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Azzurro Re I Limited - At a glance:

  • Issuer / SPV: Azzurro Re I Limited
  • Cedent / Sponsor: UnipolSai Assicurazioni S.p.A.
  • Placement / structuring agent/s: Willis Capital Markets & Advisory is sole structuring agent and bookrunner. Hannover Re and Munich Re are co-managers
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / Perils covered: European earthquake (covers portfolio in Italy)
  • Size: €200m
  • Trigger type: Indemnity
  • Ratings: ?
  • Date of issue: Jun 2015

Azzurro Re I Limited - Full details

The Azzurro Re I Ltd. cat bond is being sponsored by Italian primary insurer UnipolSai Assicurazioni S.p.A., a first-time entrant to the cat bond market seeking reinsurance coverage from the capital markets in securitised form for its portfolio located across Italy.

The Italian insurer is seeking at least €150m of reinsurance protection from the issuance by Azzurro Re I, a recently registered Irish domiciled special purpose vehicle, of a single tranche of European quake risk linked notes.

The fully-collateralized reinsurance protection provided by the cat bond will protect UnipolSai against losses from earthquakes occurring in Italy, metropolitan France (but not overseas territories), Corsica, Austria, Switzerland, Slovenia and Monaco, we understand.

The focus of the protection is however on Italy, it seems, with the exposures located there as UnipolSai provides its products to insurance buyers in Italy. So it seems the reason for including surrounding countries within the covered area is to capture earthquakes that could occur in a neighboring country, but which cause losses to UnipolSai’s portfolio.

Protection will be in effect over a 3.5 year term, with maturity scheduled for January 2019. The Azzurro Re I cat bond features an indemnity trigger and will provide the sponsor with per-occurrence protection.

The single tranche of Azzurro Re I cat bond notes will cover losses from an attachment point of €500m up to an exhaustion point of €700m, perhaps suggesting the deal could upsize to €200m if investor support allows.

The notes have an attachment probability of 0.4%, an exhaustion probability of 0.22% and an expected loss of 0.31%, we’re told. That makes this a reasonably low risk cat bond.

In terms of pricing guidance, we understand that the deal will be marketed to investors with a coupon range of 2% to 2.25%, which is quite tight guidance, but it will provide a particularly high multiple which will likely help to support investors decision-making.

Update 1:

The Azzurro Re I cat bond upsized by one-third to EUR200m before close.

At the same time the price guidance was moved to just above the initial midpoint at 2.15%.

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