Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Catastrophe bonds and collateralized help Assurant expand reinsurance coverage


Catastrophe bonds and collateralized reinsurance are both growing components of the reinsurance program of U.S. specialty insurance group Assurant, helping the insurer both diversify and expand its reinsurance coverage by 20% this year. The recent completion of the insurers $185m Ibis Re II Ltd. (Series 2013-1) cat bond has helped in this expansion.

Assurant announced that it has now finalised the structure of its 2013 catastrophe reinsurance program, which includes the catastrophe bond cover, collateralized reinsurance coverage as well as traditional reinsurance protection. As well as expanding its program Assurant has also saved money thanks to the lower rates that were available on cat bonds and reinsurance.

The insurer said that it takes into account multiple factors when building the structure of its reinsurance program, including the claims loss potential from different perils, cost-efficiencies of different coverage options and credit quality, financial strength and claims paying ability of reinsurers and counterparties.

“Assurant’s reinsurance program supports the protection we provide for more than 2.2 million policyholders,” stated Gene Mergelmeyer, president and CEO of Assurant Specialty Property. “Assurant diversified and expanded our reinsurance coverage by nearly 20 percent this year, leveraging traditional catastrophe reinsurance and catastrophe bonds at lower rates.”

The 2013 reinsurance program was placed in two phases, at the January and June renewals, with over 50 reinsurers. The traditional reinsurance cover is supplemented with fully-collateralized protection financed by catastrophe bonds to enable the insurer to further diversify its sources of reinsurance cover.

The 2013 program includes:

  • Per-occurrence catastrophe coverage, up to $1.82 billion in excess of a $240 million retention. 2013 coverage is structured in seven layers, placed 100% through traditional reinsurance and catastrophe bonds with Ibis.
  • Catastrophe bonds, $315 million of multi-year, fully collateralized hurricane protection: $130 million issued in January 2012 by Ibis Re II Ltd. and $185 million issued in June 2013 by Ibis Re II Ltd. The protection afforded by the 2013 Ibis Re II Ltd. cat bond consists of three separate layers of coverage for protection against losses from individual hurricane events, including catastrophe prone areas along the Gulf and East Coasts of the United States, Hawaii and Puerto Rico.
  • Multiple storm protection coverage, which lowers the program retention to $140 million subsequent to the first event and providing for a maximum recovery of $100 million for second and subsequent events.
  • Florida Hurricane Catastrophe Fund (FHCF) coverage, provides Florida-specific coverage for 90% of losses up to $503 million in excess of a $192 million retention level.
  • Multi-year traditional and collateralized capacity, providing $140 million of limit for coverage in addition to the IBIS Re II, Ltd. on a multi-year basis ($70 million multi-year traditional, and $70 million multi-year collateralized, respectively). This additional limit was placed to further enhance Assurant’s long-term protection from catastrophic perils.

Interestingly, despite expanding its reinsurance coverage by 20% in 2013 the premiums paid by Assurant have only increased by 5% year-on-year. In 2012 Assurant paid $233m in pre-tax reinsurance premiums for the entire catastrophe program. In 2013 the insurer has paid $245m for the expanded program, demonstrating the lower rates and excellent value the insurer has achieved, with a well structured reinsurance program leveraging collateralized protection both through reinsurance and cat bonds and traditional reinsurance cover.

You can see the structure of the 2013 Assurant catastrophe reinsurance program below:

Register today for ILS NYC 2023, our next insurance-linked securities (ILS) market conference. Held in New York City, February 10th, 2023.

Artemis ILS NYC 2023 - Insurance-linked securities conference in New York City

Get a ticket soon to ensure you can attend. Secure your place at the event here!

2013 Assurant catastrophe reinsurance program structure

2013 Assurant catastrophe reinsurance program structure

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.