Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Lodestone Re Ltd. (Series 2010-2)

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Lodestone Re Ltd. (Series 2010-2) – At a glance:

  • Issuer: Lodestone Re Ltd. (Series 2010-2)
  • Cedent / sponsor: Chartis
  • Placement / structuring agent/s: Aon Benfield Securities and Swiss Re Capital Markets are arranging this deal
  • Risk modelling / calculation agents etc: RMS
  • Risks / perils covered: U.S. hurricane, U.S. earthquake
  • Size: $450m
  • Trigger type: Industry loss index
  • Ratings: S&P: Class A-1 - 'BB+', Class A-2 - 'BB'
  • Date of issue: Dec 2010
  • news coverage: Articles discussing Lodestone Re Ltd. (Series 2010-2) from

Lodestone Re Ltd. (Series 2010-2) – Full details:

Chartis’ second issuance under their Lodestone Re Ltd. cat bond structure, securing a new layer of cover for their subsidiary National Union Fire Insurance Company of Pittsburgh for the same perils as their Series 2010-1 deal in May utilising the same deal structure.

Lodestone Re Ltd. Series 2010-2 Class A-1 and Class A-2 tranches of notes are being issued to provide Chartis’ subsidiary with increased cover for U.S. hurricanes and earthquakes. The cat bond originally targeted $250m of additional cover for Chartis, but upsized to $450m.

The transaction will provide Chartis’ subsidiary with 3 years of cover for the two perils and mature in December 2013.

The difference in structure between this and the earlier series issued by Lodestone Re are the attachment and exhaustion points.

The Class A-1 notes have a probability of attachment of 1.13% and an expected loss of 0.95% (versus 1.14% and 0.96% for the earlier deal). Standard & Poor’s, who are rating the deal say that is due to simulation error in the modelling process.

The new Series 2010-2 Class A-2 notes provide a new layer of cover. These notes attach at $5.85 billion and have an exhaustion point of $6.5 billion. The earlier cat bond Series 2010-1 Class B notes attached at $5 billion up to $6.0 billion.

Proceeds from the sale of the notes will be invested in eligible U.S. money market funds rated ‘AAAm-g’ and will pay interest equal to the yield on these funds plus 6.00% for the Class A-1 notes and 7.25% for the Class A-2 notes. This deal features three resets where as the earlier Series 2010-1 notes only had two.

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