Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Compass Re cat bond more than doubles during marketing phase


The Compass Re Ltd. catastrophe bond, which has been doing the marketing rounds for the last few weeks, has upsized prior to closing due to strong investor demand. The cat bond is being issued by Bermuda domiciled Compass Re Ltd. for insurer National Union Fire Insurance Co. of Pittsburgh, a subsidiary of Chartis, and will provide them with cover against certain U.S. hurricane and earthquake events.

When we first wrote about this deal over two weeks ago it was marketing as a three tranche $275m cat bond. Now the latest information we have on the deal shows that the overall size of the transaction has more than doubled to $575m.

Of the three tranches which comprise this cat bond, the Class 1 notes which provide cover on a per-occurrence basis remained at $75m, while both the Class 2 and Class 3 notes which both provide cover on a second and subsequent event annual aggregate basis jumped from $100m each to $250m each. All tranches provide their cover on a state weighted PCS industry loss trigger basis.

It’s good for the market (and other onlooking potential sponsors) to see a deal increase in size so much during the marketing phase. ILS investors we’ve spoken with said that the market found this transaction particularly attractive as the Class 2 and Class 3 tranches can be triggered by second and subsequent events only and the coupon payments made this a great opportunity for investors to deploy significant capital. We’re sure other sponsors will take note of this and suspect that other future deals may be structured in a similar manner.

This deal officially closes at the end of the month and we will update you if anymore details emerge.

Visit our Deal Directory for full details of the Compass Re Ltd. Series 2011-1 catastrophe bond.

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