Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Blue Coast Ltd.

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Blue Coast Ltd. – At a glance:

  • Issuer: Blue Coast Ltd.
  • Cedent / sponsor: Allianz Risk Transfer (Bermuda) Ltd.
  • Placement / structuring agent/s: Deutsche Bank and Guy Carpenter Securities worked on the deal with Deutsche also acting as swap counterparty
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. hurricane
  • Size: $120m
  • Trigger type: Industry loss index
  • Ratings: S&P: Class A - 'BB-', Class B - 'B+', Class C - 'B-'
  • Date of issue: Jul 2008
  • news coverage: Articles discussing Blue Coast Ltd. from

Blue Coast Ltd. – Full details:

Allianz Risk Transfer (Bermuda) Ltd. has entered into a deal with Blue Coast Ltd. (a Cayman Islands based SPV) to transfer U.S. hurricane risks to Blue Coast for securitization into the capital markets.

Blue Coast will provide indemnification to Allianz Risk Transfer from the day after issue until December 1st, 2010. There is also an opton extend the transaction by a further 24 months should Allianz ART choose to.

The Blue Coast deal provides cover to Allianz ART against one or more hurricanes affecting the coastal states of Texas, Louisiana, Mississippi, Alabama, Florida, Georgia, South Carolina, and North Carolina. Most of the risk sits in Florida as it features the highest notional loss by counties.

This innovative deal has a slightly different trigger mechanism to the norm. The default trigger is an industry loss warranty of state level loss estimates reported by Property Claims Services. The innovative bit is that losses are allocated down to a county level thus reducing the basis-risk to Allianz ART without needing an indemnity trigger.
The deal is structured in three tranches of Class A, B and C notes with additonal layers of retention.

There is a low and high trigger threshold for each county, which again helps reduce basis risk. Should losses go above either or both triggers then initially the notional payout will contribute to eroding the $170m retention layer. Once the retention is eroded the losses will attach to each layer of notes in turn.

This deal has a low probability of attachment and since 1900 there have only been 10 risk periods (equal to 2.9 hurricane seasons) where losses were severe enough to trigger a loss to at least one layer of notes.

The notes have received ratings of BB-, B+ and B from Standard & Poor’s.

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