Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Calypso Capital Ltd. Series 2011-1 cat bond closes at upsized €180m


AXA Global P&C have successfully tapped the capital markets for additional European windstorm cover with their second Calypso Capital catastrophe bond deal. The return to the market from AXA saw Calypso Capital Ltd. Series 2011-1 begin to market as a €100m tranche of notes but by the time the deal closed they managed to secure €180m of cover as the deal almost doubled in size.

Last year AXA issued the first Calypso Capital cat bond which secured them €275m of cover for European windstorm (again this transaction upsized significantly). The Calypso Capital shelf programme allows for as much as €1.5 billion of issuance, showing AXA’s commitment to the cat bond market, so we expect to see it utilised regularly by them.

Last year’s Calypso cat bond covered AXA for losses above an industry loss index value of €1.9 billion up to €2.5 billion, this latest transaction complements the previous deal and affords AXA cover from €1.5 billion up to €1.9 billion. So they now have a good amount of cover (for industry losses from €1.5 billion to €2.5 billion), for some of the most severe European windstorm events, provided by the capital markets.

The notes provide protection on a per-occurrence basis using a PERILS industry loss index trigger which uses CRESTA zone factors and line-of-business for weighting purposes. EQECAT provide risk modelling expertise on this transaction.

Swiss Re Capital Markets worked on structuring and placing the transaction successfully as sole structuring agent and joint-bookrunner. “We are delighted to continue our support of AXA’s risk management objectives and build on the deal completed last year. This transaction marks further strategic leverage of the data supplied by PERILS and highlights the efficiency of a weighted PERILS trigger for AXA as a global insurer,” said Jean-Louis Monnier, Swiss Re Capital Markets’ European Head of ILS. “The ILS market continues to benefit from the enhanced transparency that PERILS brings to the European insurance sector.”

Pricing wise we understand this deal pays 4% above a discounted Euribor rate. Not the best return for investors in the cat bond universe, but understandable given the point in the season we are at and the European windstorm season fast approaching.

Standard & Poor’s affirmed the preliminary rating of ‘BB-‘ for Calypso Capital Series 2011-1.

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