Assurant, the U.S. specialty insurer, has announced the completion of their property catastrophe reinsurance program for the year. They finalised their reinsurance arrangements for the 2011 hurricane season at the June renewals and in the announcement give a little insight into how their previously issued catastrophe bonds act as part of their overall reinsurance mix.
Assurant have two current catastrophe bonds, the 2009 Ibis Re Ltd. transaction, their first cat bond issue, which provides them with $150m U.S. hurricane cover, and the 2010 Ibis Re II Ltd. cat bond which again provides $150m of hurricane cover. At the time of issuing Ibis Re II, Assurants CEO said; “Reinsurance protection financed through the capital markets is strategically important for Assurant as it provides us fully collateralized, multi-year coverage that complements our traditional reinsurance program”.
This year they haven’t returned to the cat bond market for additional capital markets cover to supplement their reinsurance, but they have issued an announcement regarding their reinsurance program. In the announcement they say that the reinsurance program is supplemented with cat bonds which broaden coverage and access additional sources of capital’.
Interestingly, Assurant have provided a diagram which shows how their reinsurance program is structured (which you can see a copy of below). It shows that the Ibis Re cat bonds play a part in four of the layers of reinsurance protection in their per-occurrence catastrophe reinsurance program. The diagram clearly shows how cat bonds can complement a reinsurance program by locking in a source of cover over multiple years to support different loss levels, thus diversifying the source of capital and lowering reliance on traditional reinsurers. If and when reinsurance rates rise we are sure to see more primary insurers like Assurant tapping the cat bond market for this kind of protection.