Credit Suisse confirmed as beneficiary of new operational risk cat bonds


We are now able to confirm that investment bank Credit Suisse is the ultimate beneficiary of the collateralised coverage offered by the recently completed CHF 146 million Operational Re II Ltd. insurance-linked securities (ILS) or catastrophe bond like arrangement that transfers operational risk exposure to the capital markets.

We announced the existence of this second operational risk ILS transaction earlier this week, saying at the time that there was a good chance this was a second arrangement to provide operational risk insurance protection for investment bank Credit Suisse.

Ultimately, the beneficiary of the protection from the Operational Re II bonds is Credit Suisse, we’ve now had confirmed by parties involved in the transaction, with the deal effectively extending the amount of coverage that the first Operational Re deal began providing when it was issued in 2016.

The new Operational Re II transaction provides CHF 146 million (approx $148 million) of fully-collateralised reinsurance, collateralised through the issuance and sale of three tranches of notes to investorsby Bermuda SPI Operational Re II Ltd., providing the backing for more of an operational risk insurance policy that insurer Zurich provides to investment bank Credit Suisse.

Tapping ILS and capital market investors to provide the source of fully-collateralized reinsurance to back an operational risk insurance agreement is a sensible use-case for the ILS markets, particularly when the underlying operational risk insurance would have been difficult to source from the traditional market.

The first Operational Re was offered as the traditional insurance market could not provide sufficient capacity to make the deal economics viable, with the capital markets seen as an efficient source of risk capital and reinsurance that could step in.

Credit Suisse has again taken advantage of the appetite to invest in more insurance-linked risk among ILS funds and investors with this second deal, which extends the operational risk coverage it has through the issuance of operational risk cat bonds to now CHF 366 million (approx $377m) across the two Operational Re ILS arrangements, with all of that coverage now running until April 8th 2021.

We hope to source additional details related to this new transaction, but you can find a lot of information in our Deal Directory entries for the new CHF 146 million Operational Re II Ltd. operational risk ILS and the first of these arrangements, the Operational Re Ltd deal entry, which contains a deeper explanation of the underlying insurance coverage.

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