Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Chubb to sponsor new East Lane Re V Ltd. catastrophe bond


U.S. insurer Chubb Group are returning to the catastrophe bond market to sponsor another of their regular East Lane transactions according to market sources. This will be Chubb’s fifth cat bond, having sponsored four East Lane Re deals previously with the last transaction coming to market last March. East Lane Re V Ltd. is being issued through a newly formed Cayman Islands special purpose vehicle and is designed to provide some of Chubb’s subsidiaries with a source of collateralized reinsurance cover for U.S. hurricanes and severe thunderstorms in certain U.S. States.

East Lane Re V Ltd. is seeking to issue two classes of notes which will both be exposed to U.S. hurricanes and severe thunderstorms in the States of Alabama, Florida, North & South Carolina, Louisiana, Mississippi and Texas. Our sources told us that the deal will use an indemnity trigger and cover will be afforded on a per-occurrence basis.

The transaction is targeting $125m of cover, but could upsize as many of Chubb’s other East Lane cat bonds did. East Lane Re VI started off as a $200m deal but closed at $425m. The other interesting fact we have gleaned is that this cat bond is targeting a four-year duration with maturity scheduled for March 2016. That’s quite unusual as still most cat bonds have a three-year duration.

This is the first cat bond seeking to cover severe thunderstorm (and so tornado) risks since the Mariah Re cat bonds defaulted last year so it will be interesting to see how much appetite investors have for this deal.

That’s all the detail we have right now on this latest cat bond to come to market in this busy first quarter of 2012. We should be in a position to bring you more details when preliminary rating information becomes available. Full details on the transaction will also be added to our Deal Directory.

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