Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Golden Goal Finance Ltd.

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Golden Goal Finance Ltd. – At a glance:

  • Issuer: Golden Goal Finance Ltd.
  • Cedent / sponsor: FIFA
  • Placement / structuring agent/s: Credit Suisse First Boston is the bookrunner, and co-lead manager of the deal alongside Swiss Re Capital Markets.
  • Risk modelling / calculation agents etc: RMS
  • Risks / perils covered: Event cancellation risk
  • Size: $262m
  • Trigger type: Unknown
  • Ratings: Moodys: 'A3'
  • Date of issue: Sep 2003

Golden Goal Finance Ltd. – Full details:

FIFA, world football’s governing body, is set to issue a so-called catastrophe bond to protect its investment in the 2006 World Cup in Germany.

Cancellation of the 2006 FIFA World Cup will have occurred if no official result is determined or declared in respect of the Final Match of the 2006 FIFA World Cup in accordance with the FIFA Regulations and no Final Match can or will be held on or before 31st August 2007.

“Final Match” is the match the winner of which has been or will be determined or declared to be the world champions of the 2006 FIFA World Cup.

CSFB was lead manager on a $262 million deal which would see bondholders rather than insurance companies take on the risk of the 2006 tournament being postponed or cancelled excluding certain risks such as world war or boycott. If the tournament is canceled because of terrorism risk, the bond will pay out, a spokesman for Zurich-based FIFA said. In the event of cancellation, investors will lose 75% of their money invested in the bonds.

FIFA conscientiously opted for this arrangement having carefully evaluated the traditional insurance market, which no longer covers FIFAs needs as required. As a result of the attacks in the USA on 11 September 2001 and the subsequent withdrawal by insurers from the 2002 FIFA World Cup cancellation insurance policy, FIFA requires any future protection to be immune from such risk. The proposed transaction meets FIFAs requirements in this respect.

This transaction is said to be the first to transfer event risk (the risk of a sporting event being cancelled) and the first to transfer the risk of man-made catastrophe as well as natural catastrophe to the capital markets. The bond was rated A3, or mid-investment grade by ratings agency Moody’s Investors Service. It came in four tranches denominated in three currencies via a special purpose vehicle called Golden Goal Finance Limited.

RMS performed risk analysis which examined the threat and impact of terrorism events and natural disasters on the 64-match FIFA World Cup final competition. This innovative securitization, Golden Goal Finance Ltd, is the first to cover terrorism risk, as well as the first to cover risk to a sports event.

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