Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Panda Re Ltd. (Series 2015-1)

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Panda Re Ltd. (Series 2015-1) – At a glance:

  • Issuer: Panda Re Ltd. (Series 2015-1)
  • Cedent / sponsor: China Property and Casualty Reinsurance Company (China Re)
  • Placement / structuring agent/s: GC Securities was sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: Participating investors undertook their own risk modelling. RMS is reset agent
  • Risks / perils covered: China earthquake
  • Size: $50m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jul 2015

Panda Re Ltd. (Series 2015-1) – Full details:

Panda Re Ltd. will be registered as a Bermuda domiciled SPI, we understand, aiming to issue a single tranche of Series 2015-1 notes to collateralized underlying reinsurance contracts for the cedent or sponsor.

The sponsor is the Chinese state-owned reinsurer China Property and Casualty Reinsurance Company, more commonly known as China Re.

For this transaction, China Re is seeking between $50m and $70m of protection, with $70m the preferred figure we understand. Panda Re will cover losses suffered from earthquakes across all of the People’s Republic of China, but excluding Hong Kong and Macau.

The Panda Re 2015-1 catastrophe bond will use an indemnity trigger and losses will be on a per-occurrence basis.

The Panda Re 2015-1 cat bond will have a three-year term, with inception targeted for the 1st July 2015 we understand.

China Re is seeking to secure between $50m and $70m of cover from this Panda Re cat bond and we understand that the reinsurer came to market with a range of layer options that it would like to secure coverage for.

Panda Re has been launched alongside the China Re reinsurance renewal we believe, so by giving investors a number of options to show interest in the reinsurer is able to test the appetite of the capital markets for Chinese quake risks in cat bond form while also comparing that appetite to traditional reinsurance capital sources.

The cat bond was marketed with six layer options, we understand, but the consensus from the ILS and cat bond investor community is said to have converged on a layer that would attach at 2.1 billion Chinese Yuan, which equates to roughly USD$340m.

We’re told that the layer will likely be either 400m or 800m Chinese Yuan in size, meaning the notes issued by Panda Re will just cover a percentage of China Re’s losses within that layer.

The notes were issued as USD denominated in order to attract the widest possible investor response, with Panda Re’s limit to China Re based on US dollars, but they are positioned alongside certain layers of China Re’s traditional retrocession program.

We understand that the book had been coming together to support this attachment level, with an attachment probability of 2.61%, an expected loss of 2.12% and risk spread pricing of 4.1%. China Re is seeking between $50m and $70m of cover at this level, with the $70m preferred.

It’s a low coupon and a low multiple of around 1.93 times the initial expected loss, however this is aligned with other diversifying risks which may attract cat bond fund managers. Some ILS investors are likely to forgo the opportunity to invest in Panda Re, as it is a low coupon, but the diversification it offers to others could make it an attractive opportunity.

GC Securities is involved in bringing the Panda Re cat bond to market, providing the structuring agent and bookrunning services. We understand that investors are undertaking their own risk analysis on this deal, but risk modelling firm RMS is providing reset agent services.

The notes will be transferable in the secondary market, with them expected to be listed on the Bermuda Stock Exchange (BSX).


The Panda Re 2015-1 cat bond completed at $50m in size, the lower end of China Re’s aspirations. The notes were listed on the BSX.

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