French reinsurance company SCOR said that the $300 million size of its recently completed Atlas IX Capital DAC (Series 2016-1) catastrophe bond, which replaced a $60 million tranche of a matured cat bond, reflects the firms increased presence in the U.S. catastrophe risk market.
SCOR has been increasing its focus on U.S. property catastrophe risks in recent years, underwriting increasing amounts of reinsurance in that market and as a result requiring increasing amounts of retrocession.
The recently completed Atlas IX Capital 2016-1 cat bond replaces the $60 million U.S. hurricane and earthquake tranche of Atlas Reinsurance VII Limited, which was issued in 2012 and matured this month.
Atlas IX Capital 2016 provides SCOR with retrocessional reinsurance for loss from U.S. named storm and U.S. or Canadian earthquakes. The fact this cat bond hit $300 million reflects the increased need for retrocession in SCOR’s property catastrophe reinsurance business as it increases its U.S. and North American underwriting.
SCOR called the new cat bond “part of its policy of diversifying its capital protection tools.” The retrocessional reinsurance protection from the Atlas IX cat bond runs for three years, to the end of 2019, covering SCOR on an industry loss trigger and annual aggregate basis.
SCOR explained; “Loss payments covered by this cat bond are based on annual aggregates with, for each contributive event, the application of an index combining reported market losses with an estimation of SCOR’s market shares at county level.”
SCOR said that the growth into U.S. catastrophe risks is part of its Optimal Dynamics plan and that the “protection of its capital constitutes a strategic axis” for the reinsurer.
Victor Peignet, CEO of SCOR Global P&C, commented on the completion of the reinsurers latest catastrophe bond; “The successful placement of this new cat bond contributes to the optimisation of SCOR’s retrocession structure; it enables the Division to deploy its client-focused initiative in the US, offering cat capacities in line with its ambition to reach a Tier 1 position in selected segments of the US market. This transaction complements SCOR’s retrocession programme for 2016, minimising counterparty credit exposure and diversifying counterparty risk.”
As it seeks to protect its capital, SCOR had repeatedly accessed the capital markets for retrocession. To date the reinsurer has completed seventeen capital market transactions, including catastrophe bonds, reinsurance sidecars, mortality bonds and contingent capital arrangements.
As SCOR grows its portfolio in catastrophe risks in regions such as the U.S., the use of the capital markets will likely remain a vital source of protection and efficient retrocession for the reinsurer.