Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Johnston Re Ltd.

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Johnston Re Ltd. – At a glance:

  • Issuer: Johnston Re Ltd.
  • Cedent / sponsor: North Carolina JUA / IUA
  • Placement / structuring agent/s: GC Securities assisted
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: North Carolina hurricane
  • Size: $305m
  • Trigger type: Indemnity
  • Ratings: S&P: Class A - 'BB-', Class B - 'BB-'
  • Date of issue: May 2010
  • news coverage: Articles discussing Johnston Re Ltd. from

Johnston Re Ltd. – Full details:

Munich Re is placing a new catastrophe bond deal under the newly formed Cayman Islands based SPV Johnston Re Ltd. on behalf of the two North Carolina based non-profit organisations which have insurance companies as their members, the North Carolina Joint Underwriting Association and the North Carolina Insurance Underwriting Association.

Johnston Re will provide reinsurance protection in North Carolina and the Barrier Islands to the associations.

It’s a three year deal which will run until May 2013.

The deal can be triggered on a per-occurrence basis measured by the actual loss experience the associations member insurers suffer and as such covered losses are not directly linked to Munich Re’s exposure in NC.

Munich Re America Inc. will be responsible for making premium payments due under a retrocessional agreement in place between it and Johnston Re Ltd. Guy Carpenter are assisting with this deal through their GC Securities arm.

Originally a single tranche $200m cat bond, Johnston Re Ltd. was extended to take advantage of demand and completed as a two tranche deal of $305m.

The first tranche has been optimised to complement and work with the existing Parkton Re cat bond which Swiss Re issued for the NCJUA/NCIUA, the tranche features a drop down that allows it to replace Parkton Re when it expires in 2011.

The second tranche runs for three years directly above the first tranche adding an extra layer of cover.

The catastrophe bond utilizes an indemnity trigger structure based on the Ultimate Net Loss of the NC JUA/IUA in the event of a hurricane.

Johnston Re includes a feature originally developed in Parkton, in which the release of non-needed capital can occur if the bond is extended beyond the risk period for claims development. Additionally, Johnston Re is the first bond to lower the minimum retained share within the risk layer from 10 percent to 5 percent.

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