Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

George Town Re Ltd.

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George Town Re Ltd. – At a glance:

  • Issuer: George Town Re Ltd.
  • Cedent / sponsor: St Paul Re
  • Placement / structuring agent/s: Goldman Sachs
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Worldwide all perils incl. marine & aviation
  • Size: $68.5m
  • Trigger type: Indemnity
  • Ratings: ?
  • Date of issue: Dec 1996

George Town Re Ltd. – Full details:

Coverage for U.S./Caribbean Cat, European Cat, Other Property Cat, retrocessional / Lloyd’s shorttail, marine, aviation and fire. In the form of a retrocessional reinsurance quota share.

St Paul Re ceded a quota share of its excess of loss property reinsurance treaty to George Town Re, so the cat bond issuer became one of the reinsurers retrocessionaires.

$10m of limit was ceded per line of business.

The cat bond trigger point was set at 170% of the underlying risks coverage limit.

The transaction was really designed to augment St Paul Re’s capacity across the five lines of business, in this way the transaction was not only a pure transfer of risk, but a very early example of a securitisation of risk being used to tap third-party capital to augment underwriting capacity.

George Town Re sold 89 $500,000 units, totalling $44.5m in one tranche, plus another $24 million of preference shares.

The interest paid to investors varied with the available net income of George Town Re. George Town Re did not provide a coupon to investors, rather it distributed available net income to them.

It was calculated using a combination of the total net premium income available to the vehicle and the return made on securities investments.

The George Town Re catastrophe bond paid out roughly $0.5m to the sponsor after it suffered some losses due to a range of catastrophic events, including Hurricane Floyd, Windstorms Anatol, Lothar and Martin, the 2000 UK Floods, and the 2001 attack on the World Trade Centre.

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