Information is beginning to emerge about a novel transaction undertaken by leading Swiss insurance-linked securities investment company Clariden Leu. We believe the bank has designed this new transaction type in order to create available investment capacity for clients in its cat bond fund.
Details are not very clear as this has been an unrated transaction and no press release was forthcoming. From what we have heard Clariden Leu transformed a $20m U.S. natural peril industry loss warranty (ILW) contract into insurance-linked notes which can then be made tradeable in the secondary market. It’s believed that the ILW can be triggered by a $15b loss although we’re unsure exactly what perils are covered.
Clariden Leu recently stopped accepting new subscriptions to its Cat Bond Fund due to the lack of new investment opportunities in the market. We read this to mean the fund was oversubscribed at the time and the lack of issuance made it impossible to find investments for new clients. It’s possible Clariden Leu have now found a way to create investment opportunities in cat bonds through this method of transforming insurance risk into catastrophe bond notes. This is the first we’ve heard of this type of transaction being issued.
Clariden Leu are now said to be working on a similar deal involving European windstorm risk and may use the PERILS loss index as a trigger.
We’ll bring you more information if it becomes available.