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Blue Danube II catastrophe bond completes, rated, lists in Bermuda


The latest catastrophe bond transaction from Germany headquartered insurance and reinsurance group Allianz has now successfully completed, received its rating and the issued cat bond notes have been listed in Bermuda. The Blue Danube II Ltd. (Series 2013-1) cat bond has now secured sponsor Allianz Argos 14 GmbH a $175m three-year source of fuly-collateralized, multi-peril reinsurance protection.

The Blue Danube II cat bond launched as a $150m cat bond deal seeking to provide Allianz with cover for hurricanes or named storms in the U.S., the majority of the Caribbean and Central America including Mexico, as well as earthquake risks in the U.S. and all provinces of Canada.

The protection from the cat bond is on a per-occurrence basis for all perils but uses two types of trigger depending on the peril. It uses a Modelled Industry Trigger Transaction (MITT), which takes industry loss estimates and weights them after the event against certain applicable modelled portfolios, for U.S. hurricane and the earthquake risks. A standard modelled loss trigger is being used for the other regions that this cat bond covers for hurricane risks, so most of the Caribbean and certain Central American countries including Mexico.

The single tranche of notes grew in size while the transaction was being marketed to finish providing 17% more cover at $175m. At the same time the pricing on the transaction, which launched with a coupon guidance range of 4.75% to 5.5% and was subsequently reduced to a range of 4.25% to 4.75%, finally dropped to the bottom of the reduced range to finish offering a risk spread to investors of 4.25%.

Following the recent trend for pricing to tighten significantly over the period a cat bond has been marketed, Blue Danube II saw its pricing drop by -17% from the mid-point of the original price guidance, or as much as -23% if you took the upper end of that original price range.

The cat bond provides Allianz with replacement and extended protection the cover from its soon to mature Blue Fin 3 catastrophe bond deal.

Rating agency Standard & Poor’s has assigned its ‘BB+ (sf)’ credit rating to the series 2013-1 class A notes issued under the principal-at-risk variable-rate note program Blue Danube II Ltd.

The Blue Danube II Ltd. principal-at-risk variable-rate note program has been admitted for listing on the Bermuda Stock Exchange, as have the $175m Series 2013-1 cat bond notes. Appleby Securities (Bermuda) Limited acted as listing sponsor. This takes the total amount of ILS listed on the BSX to just under $7.24 billion, further growing the record volume of ILS listings that the BSX hosts.

You can read much more about the Blue Danube II Ltd. (Series 2013-1) transaction in our catastrophe bond Deal Directory.

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