FCC SPARC 2005

This transaction is AXA’s firset securitisation of motor insurance policies underwritten by its French entity, AXA France IARD.

The reinsurance transaction covers part of AXA’s French individual motor insurance portfolio.

It is an example of insurance-linked securities (ILS) being used to transfer high claims frequency and low claims severity risks to capital market investors.

The FCC Sparc ILS deals were issued under the French securitization vehicle laws, the Fonds Commun de Créances
(FCC).

The notes featured a loss ratio trigger, meaning if the loss ratio deviated above a pre-defined level the notes could pay out.

Three tranches of notes were issued, totalling EUR 200 million of FCC Sparc 2005 notes.

A fourth tranche was equity based and AXA itself was the initial subscriber to that EUR 37.5 million layer, which covered first losses on the portfolio.

A EUR 105.7 million Class A tranche of notes were most remote in terms of risk and received a ‘AAA’ rating from S&P and Fitch, the first and only ILS notes to ever receive a triple-A, we believe.

A EUR 67.3 million Class B tranche of notes were next most remote in terms of risk and received a ‘A’ rating from S&P and Fitch.

A EUR 27 million Class C tranche of notes were the riskiest layer of notes, but still received a ‘BBB / BBB-‘ rating from S&P and Fitch.

The AXA FCC Sparc 2005 motor ILS notes provided reinsurance over 4 consecutive and independent cover periods, with AXA able to reset the loss ratio triggers for each period.

To effect the transaction, an external reinsurance company entered into a quota share with AXA France IARD, then the reinsurer transferred to the FCC Sparc the receivable arising from AXA France IARD’s obligation to repay the reinsurance collateral. The FCC then issued 3 tranches of notes subscribed by external qualified investors.