IBRD CAR 116

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IBRD CAR 116 - At a glance:

  • Issuer / SPV: IBRD CAR 116
  • Cedent / Sponsor: Republic of Chile
  • Placement / structuring agent/s: Swiss Re Capital Markets and Aon Securities are joint structuring agents and joint bookrunners. Citigroup are joint bookrunner.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / Perils covered: Chile earthquake
  • Size: $500m
  • Trigger type: Parametric
  • Ratings: NR
  • Date of issue: Feb 2018

IBRD CAR 116 - Full details

This is the first catastrophe bond issuance that will provide insurance protection to the Republic of Chile. It was issued as part of a multi-country cat bond offering from issuer the World Bank's International Bank for Reconstruction and Development, featuring five tranches as IBRD CAR's 116, 117, 118, 119, 120, covering the four Pacific Alliance countries (Chile, Colombia, Mexico, Peru) against earthquake losses on a parametric basis.

This Chilean earthquake cat bond is being issued through the International Bank for Reconstruction and Development (IBRD) global debt facility, while the beneciciary of the parametric insurance coverage is the Republic of Chile.

The IBRD will issue one series of catastrophe-linked Capital At Risk notes (CAR Series 116) through its debt issuance facility, which will be sold to qualified investors and insurance-linked securities (ILS) specialists, to provide the reinsurance capital to back the earthquake protection. The IBRD will enter into a risk transfer agreement directly with the Republic of Chile.

The issuance is preliminarily sized at $300 million of coverage for the Republic of Chile, which on a parametric basis would be a sizeable source of disaster recovery financing should any qualifying major earthquakes occcur.

The single tranche of IBRD Chilean earthquake-linked capital-at-risk notes will provide the Republic of Chile with per-occurrence protection across a three year period, with maturity scheduled for February 2021.

The $300m of IBRD Chilean earthquake-linked capital-at-risk Series 116 Class A notes have a modelled attachment probability of 1.35%, a modelled expected loss of 0.86% and are being offered to investors with a risk margin (effective coupon) of between 2.75% and 3.5%, we understand.

The earthquake-linked notes can be triggered with a range of payout amounts, set at 30%, 70% or 100% of principal, depending on various parameters associated with an earthquake event, including the magnitude, epicenter location, depth etc.

Update 1:

The IBRD CAR 116 issuance features one series of Capital At Risk notes (CAR Series 116) covering Chile earthquake risk, which will provide insurance protection directly to the Republic of Chile. This series launched as a $300 million offering, but our sources now say that this series is targeting between $460 million and $500 million, while the initial pricing range marketed of 2.75% to 3.5% has been narrowed to 2.5% to 2.75%, so below the original guidance range.

Update 2:

This series of Chilean earthquake cat bond notes priced at $500 million in size and with the coupon equivalent risk margin at the bottom of already reduced guidance, at 2.5%.




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