Windmill I Re Ltd. (Series 2013-1)

Achmea is a large Dutch insurance group, owning a number of brands across property, casualty, life, health and pensions. The firm also owns Achmea Reinsurance Company NV, a group reinsurer which predominantly retro cedes risk from the Achmea group to the reinsurance market as well as offering some reinsurance to selected third parties.

Windmill I Re Ltd. is a Bermuda domiciled special purpose insurer. The listing of the variable rate note program and the €40m tranche of Series 2013-1 notes on the BSX occurred late yesterday, with both being listed under Section V as Insurance Linked Securities.

The notes cover €40m of European windstorm risk and are structured on an indemnity trigger basis. That makes the Windmill I Re cat bond the first indemnity European windstorm catastrophe bond on record, yet another milestone for the ILS market in 2013.

The covered area for the transaction is the Netherlands, Belgium, France, Germany, Portugal, Spain and the UK. It is predominantly Dutch windstorm cover however, as the other countries make up a very small contribution to the cat bonds expected loss.

The cover afforded by Windmill I Re runs for a three-year risk period which began on the 1st January and runs to the end of December 2016.

The €40m Windmill I Re Ltd. Series 2013-1 Class A Principal At-Risk Variable Rate Notes were priced at 3.25% above the return on the underlying money market fund collateral.

The ceding party was Achmea Reinsurance Company NV who ceded risk from the Achmea group Dutch non- life companies property portfolios to Windmill I Re where the risk was transformed and issued as securities.

Aon Benfield Securities structured the cat bond transaction and placed the deal. The Windmill I Re cat bond was a private offering, likely to a small group of investors, although Aon Benfield Securities will have arranged the sale of the notes.

To reduce costs on the transaction Aon Benfield Analytics provided risk modelling and will be the reset agent for the cat bond which removed the need for a third-party modelling firm. The underlying collateral for the transaction was invested in Euro-denominated government money market funds, which further streamlined the issuance according to Aon. Also, the notes were not submitted for rating, further reducing frictional costs for the sponsor.