Signum Finance Cayman Ltd. Series 2010-09 is not the best known insurance-linked security but it is an interesting transaction. We first wrote about the deal back in November 2010 when it was issued by Goldman Sachs. The transaction is designed to provide Goldman Sachs with a mortality hedge for a defined block of life insurance.
The issuer, Signum Finance Cayman Ltd., sold $200m of notes to investors, the proceeds of which were used to purchase collateral assets in the form of 15-year senior unsecured bonds issued by Goldman Sachs. Signum Finance also entered into a 15 year mortality swap with Goldman Sachs as the counterparty on the deal. Under the mortality swap Signum Finance will provide mortality protection on a defined block of U.S. level-term life insurance policies and will make payments to Goldman Sachs in the event the mortality experience of the block of life policies exceeds predefined trigger points. Meanwhile payments from Goldman Sachs to Signum Finance go towards the noteholders premium payments.
It’s a novel transaction providing capital markets backed protection against increases in life insurance mortality experience for Goldman Sachs.
Since issuance the deals rating from Fitch Ratings has been on a negative outlook due to the rating Fitch give to Goldman Sachs. As the swap counterparty and the collateral assets issuer, Goldman Sachs were considered the riskiest part of the transaction. Now the rating has been changed to have a stable outlook, in line with Fitch’s ratings for Goldman Sachs.
Fitch Ratings also note that the mortality experience of the block of life insurance has to date been in line with the original modelling expectations.