Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

$250m Merna Re III Ltd. catastrophe bond was issued in June

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When we said back in July that a Merna Reinsurance III Ltd. catastrophe bond issuance was likely, what we of course meant was that it had already been issued… It transpires that the formation of Merna Reinsurance III Ltd. as a licensed entity in Bermuda was for a very specific, single investor catastrophe bond issued by State Farm.

Aon’s recent annual review of the insurance-linked security market includes a mention of this cat bond transaction as having completed right at the end of June 2010. Details are scant and we cannot uncover any rating information for this transaction. It appears not to have been marketed to ILS investors, rather a single investor had been lined up in advance and purchased all of the associated notes.

$250m Merna Reinsurance Re Ltd. provides State Farm Mutual Automobile Insurance Company with reinsurance protection against a number of U.S. risks. These include U.S. hurricane, earthquake, severe thunderstorm, winter storm and wildfire. We assume that a deal with a range of risks involved such as this was of great interest to the sole investor as a way to diversify the risks they held.

The deal utilised an indemnity trigger and was issued as a single tranche of notes. We assume as they have this detail in their report that Aon Benfield Securities have managed this transaction for State Farm.

We’ve added this latest cat bond transaction to our Deal Directory.

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