K3 securitization

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K3 securitization - At a glance:

• Issuer / SPV: K3 securitization
• Cedent / Sponsor: Hannover Re
• Placement / structuring agent/s: ?
• Risk modelling / calculation agents etc: ?
• Risks / Perils covered: U.S. hurricane, U.S. earthquake, European windstorm, Japan earthquake
• Size: $230m
• Trigger type: Indemnity
• Ratings: ?
• Date of issue: Mar 2002

K3 securitization - Full details

“K3” is a structured financing involving a portfolio-linked securitization, comprising a variety of non-proportional reinsurance covers for natural perils (hurricanes and earthquakes in the U.S., wind-storms in Europe and earthquakes in Japan) and worldwide aviation business.

This transaction provides Hannover Re with an equity substitute in the amount of U.S. $230 million. U.S. and Japanese institutional investors are partners in this transaction, whose yield will be a reflection of the profitability of the securitized reinsurance business.

Investors share Hannover Re’s risk up to the maximum of their invested capital in case of loss from the securitized risks. The term of the transaction is three years with an option for the investors to renew for two more years.