Chubb like the cost-effective diversification that cat bonds bring to their reinsurance program


Chubb Corporation, one of the largest insurance groups and a regular sponsor of catastrophe bonds, recently announced their results for the first quarter of 2011 and held an earnings conference call which featured comments from their senior management team. As an active sponsor of cat bonds it’s always interesting to hear any comments they make about the market.

In the call on the 21st April, Chubb’s CFO Richard Spiro made a comment about their use of catastrophe bonds which suggests that they hold a positive view of their use of insurance-linked securities for catastrophe risk transfer.

Chubb completed their fourth cat bond in March this year, the $425m East Lane Re IV Ltd. (Series 2011-1) which provides them with collateralized reinsurance cover for some of their hurricane, earthquake, thunderstorm and winter storm risks. This deal replaced cover from some of their previous East Lane Re cat bonds.

Richard Spiro said; “We like the diversification that these cat bond arrangements bring to our overall reinsurance program. Importantly, they provides us with a cost-effective alternative to traditional reinsurance with pricing locked in for 3 or 4 years and we have fully collateralized protection.”

This quote highlights some of the benefits that sponsoring a cat bond can bring to insurers and with companies the size of Chubb that diversification and locked in pricing is important for their balance sheets. It’s encouraging to hear positive sentiment from Chubb and it seems likely that we’ll see additional foray’s into the cat bond market from them in the future.

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