Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Chartis secures an upsized $450m of cat bond cover in latest Lodestone Re issuance


Chartis have managed to secure $450m of catastrophe bond cover in their latest Lodestone Re Ltd. issuance. As we wrote previously here, Chartis sought to return to the cat bond market to secure further cover under their Lodestone Re Ltd. Bermuda domiciled SPV. The deal was initially said to be valued at $250m, split into two tranches. However it has upsized significantly to $450m at close, affording Chartis a great opportunity to extend its protection.

This latest Lodestone Re cat bond issuance is in two tranches of Series 2010-2 notes and provides Chartis with cover against U.S. hurricanes and earthquakes. The fact that this transaction upsized so significantly clearly shows that investor appetite for U.S. peak risks is still strong and shows the cat bond market ending the year on a very positive note.

Bloomberg says that the first tranche which closed at $325m pays 7.25% points above three-month U.S. Treasury Bills and the second tranche of $125m pays 6% points above.

With the closure of this deal Chartis has issued $875m worth of catastrophe bonds under Lodestone Re Ltd. during 2010 alone. This issuance takes our Deal Directory toll of issued cat bonds and cat bonds with a confirmed marketing value over the $4.7 billion mark for the year. With more deals to close it’s likely we will see that magic $5 billion figure by year end.

Trading Risk suggest that pricing for this deal came in 30% cheaper for this deal. This shows pricing is becoming more attractive all the time and Chartis have made a smart move by capitalising on this to secure so much cover.

Update: For the latest details on this transaction including the rating and detail of the structure visit our Deal Directory.

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