Eurus II Ltd. – Full details:
Hannover Re returned to the catastrophe bond market with a €150m deal (upsized from the original E75m due to investor demand) featuring non-U.S. perils and a novel approach to the collateral problem.
Eurus II is being marketed as a €150m deal designed to provide Hannover Re with protection against losses from European windstorms in Belgium, Denmark, France, Germany, Ireland, the Netherlands, and Britain between August 2009 and March 2012.
The bond will pay out based on readings of windspeed taken by calculation agent AIR Worldwide at stations within those countries.
The Eurus II transaction will utilise a tri-party asset repurchase scheme involving BNP Paribas, the issuer and a clearing house (Euroclear). This will use the investment banks portfolio of highly rated corporate and sovereign bonds as a form of collateral. Eurus II will enter into the repurchase agreement with BNP Paribas who will buy back assets at pre-agreed prices just in time for each interest payment. After interest has been paid Eurus II will again buy collateral assets which should equal the outstanding amount of principal.
This deal will run over three years with maturity set for the end of July 2012.