Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Studio Re Ltd.

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Studio Re Ltd. – At a glance:

  • Issuer: Studio Re Ltd.
  • Cedent / sponsor: Vivendi Universal SA
  • Placement / structuring agent/s: ?
  • Risk modelling / calculation agents etc: ?
  • Risks / perils covered: California earthquake risks
  • Size: $175m
  • Trigger type: Parametric index
  • Ratings: S&P: 'BB+'
  • Date of issue: Dec 2002

Studio Re Ltd. – Full details:

Vivendi Universal SA sold a catastrophe bond to hedge itself against possible earthquake damage to its Southern California properties. Cover is on a parametric basis, related to the physical intensity of earthquake damage. The amount that could be lost by investors in the notes issued by Studio Re would depend on the cost of any quake damage as recorded on an index created for the deal.

The bond was sold to the private-placement market Dec. 30. Under the terms of the sale, note and preference shareholders are providing Vivendi with 42 months of reinsurance “capped” at $175 million.

Under the terms of the bond sale, preference shareholders take the first loss in the event of earthquake damage, with losses for noteholders taking place after preference shareholders lose their principal. In the event of a serious earthquake, both groups could lose as much as 100 percent of their principal. The coverage is spread through several reinsurers.

The deal uses Studio Re set up as a special purpose vehicle, based in the Cayman Islands.

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