IBRD CAR 117

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IBRD CAR 117 - At a glance:

  • Issuer / SPV: IBRD CAR 117
  • Cedent / Sponsor: Republic of Colombia
  • 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: Colombia earthquake
  • Size: $400m
  • Trigger type: Parametric
  • Ratings: NR
  • Date of issue: Feb 2018

IBRD CAR 117 - Full details

This is the first catastrophe bond issuance that will provide insurance protection to the Republic of Colombia. 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 Colombia 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 Colombia.

The IBRD will issue one series of catastrophe-linked Capital At Risk notes (CAR Series 117) 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 Colombia.

The issuance is preliminarily sized at $300 million of coverage for the Republic of Colombia, 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 Colombia earthquake-linked capital-at-risk notes will provide the Republic of Colombia with per-occurrence protection across a three year period, with maturity scheduled for February 2021.

The $300m of IBRD Colombia earthquake-linked capital-at-risk Series 117 Class A notes have a modelled attachment probability of 2.78%, a modelled expected loss of 1.56% and are being offered to investors with a risk margin (effective coupon) of between 3.5% and 4.25%, we understand.

The earthquake-linked notes can be triggered with a range of payout amounts, set at 25%, 50% 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 117 offering, launched as a single $300 million tranche of catastrophe-linked Capital At Risk notes (CAR Series 117) designed to cover Colombian earthquake risks directly for the Republic of Colombia. This tranche is now targeting between $375 million and $400 million of coverage for Colombia, while the initial coupon guidance of 3.5% to 4.25% has now dropped to 3.00% to 3.50%, we understand.

Update 2:

This series of Colombian earthquake cat bond notes priced at $400 million in size and with the coupon equivalent risk margin at the lowest end of already reduced guidance, at 3%.




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