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Dunant Re IC Limited (Series 2021-1)

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Dunant Re IC Limited (Series 2021-1) – At a glance:

  • Issuer: Dunant Re IC Limited
  • Cedent / sponsor: Danish Red Cross
  • Placement / structuring agent/s: Replexus
  • Risk modelling / calculation agents etc: Mitiga Solutions
  • Risks / perils covered: Volcanic eruption
  • Size: $3m
  • Trigger type: Parametric
  • Ratings: NR
  • Date of issue: Mar 2021

Dunant Re IC Limited (Series 2021-1) – Full details:

This is the first pure volcanic risk catastrophe bond.

The $3 million privately placed cat bond issuance was brought to market by Replexus and Howden Capital Markets and backed by leading cat bond investors for the sponsor, the Danish Red Cross.

It was issued on behalf of the Danish Red Cross and secures a source of relief financing that will be paid out on the occurrence of a qualifying volcanic eruption from one of 10 covered volcanoes.

This volcano cat bond uses a parametric trigger based on plume height. A payout of the $3 million volcano cat bond would be triggered if a volcanic ash plume reaches a certain height and the prevailing wind directs the resulting ash to fall towards vulnerable communities.

The volcanic risk cat bond was issued using Replexus’ Guernsey domiciled Dunant Re IC Limited reinsurance structure and settled them using its unique blockchain based ILS platform.

Meanwhile, modelling of the volcanic risk was undertaken by specialist Mitiga Solutions.

Dunant Re IC Limited issued the $3 million tranche of Series 2021-1 Class VE principal-at-risk notes, which are callable and due for maturity after three years in 2024.

Ten volcanoes are covered, selected because they pose the greatest humanitarian risk and the parametric trigger has three plume height thresholds that can be met to define a payout amount.

The ten volcanoes covered by the catastrophe bond all have at least 700,000 individuals living within 60 miles (100km) radius of a potential eruption and include North America’s second highest volcano, Popocatépetl, Mexico, and Colombia’s Nevado del Ruiz, which killed 23,000 and displaced thousands of people when it erupted in 1985.

Other volcanoes covered by the bond include three in Ecuador (Cotopaxi, Tungurahua and Pichincha), two in Indonesia (Merapi and Raung), one in Chile (Villa Rica), one in Guatemala (Fuego), and one in Cameroon (Mt. Cameroon).

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