Swiss Re Insurance-Linked Fund Management

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Amlin bring Tramline Re Ltd., their first catastrophe bond, to market


Amlin are entering the catastrophe bond market for what we believe is the first time with a multi-peril cat bond which will be sponsored by their Amlin AG subsidiary. The cat bond is being issued through a newly established Bermuda domiciled SPV, Tramline Re Ltd. and comprises $75m of Series 2011-1 notes. Tramline Re has been set up as a program which would allow Amlin to return to the cat bond market more easily for future issuances.

Through Tramline Re Ltd. Amlin AG are seeking $75m of fully collateralized multi-year industry loss based reinsurance protection on an annual aggregate basis over three years until maturity in December 2014. The notes issued by Tramline Re will cover certain of Amlin AG’s U.S. hurricane, U.S. earthquake, and Europe windstorm risks from January 2012 to the end of December 2014.

The deal covers Amlin against qualifying hurricanes in the usual U.S. Gulf, Florida and Eastern coastal states, earthquakes in California and other states and European windstorms across much of western Europe. Full details can be found in our Deal Directory entry.

The Tramline Re Ltd. cat bond is structured as an industry loss annual-aggregate transaction, meaning that qualifying losses can mount over each year of the deal up to a trigger point on an index until they hit an exhaustion point. The trigger point on the index as at 630 and the exhaustion index point is 730. For a peril event to qualify under the terms of the deal it has to have an index value of at least 75. The aggregates reset to zero annually.

Aon Benfield Securities are arranging the deal while AIR Worldwide are risk modeller and calculation agent. The deal uses an index based on Property Claims Service industry loss data for U.S. hurricanes and earthquakes and PERILS AG data for the European windstorm industry loss index.

Collateral for the deal is being managed through investments in U.S. Treasury money market funds which must be highly rated. Standard & Poor’s gave the single tranche of Tramline Re Ltd. Series 2011-1 notes a preliminary rating of ‘B-‘.

It’s interesting to see such an established re/insurance firm as Amlin decide to enter the cat bond market, perhaps it shows an increasing confidence among re/insurers that the capital markets convergence sector is maturing to a point where they feel they can add it to their reinsurance mix. Or perhaps the pricing seems particularly attractive right now. Whatever Amlin’s reasonings for issuing this Tramline Re cat bond, the program they have set up suggests they look at it as a potential long term piece of their reinsurance cover. Amlin AG underwrite the Amlin groups international reinsurance business from bases in Bermuda and Switzerland but the Tramline program is set up to allow other Amlin PLC subsidiaries to issue cat bonds through it in the future if they choose. A sensible move, but equally interesting as it suggests there may be more to come in future years from Tramline Re.

Full details are available in our Deal Directory.

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