Italian and global insurance giant Assicurazioni Generali S.p.A. has confirmed to investors in its EUR 200 million Lion III Re DAC catastrophe bond that European windstorm Bernd and related floods in July 2021 are not a covered event for noteholders to be concerned about, this publication has learned.
The Lion III Re catastrophe bond, which was issued in June 2021, was called the world’s first green catastrophe bond deal because of a range of features of the transaction.
The green cat bond features were said to be: that the Lion III Re cat bond will free up an equivalent amount of capital from Generali’s own balance-sheet to be used for projects as specified in the green ILS framework; that the collateral will be invested specifically into green bonds issued by the EBRD; and that related to reporting on the projects Generali will allocate balance-sheet capital to and the EBRD’s green bond reporting.
Perhaps more importantly for some investors, the Lion III Re cat bond provides Assicurazioni Generali S.p.A. with EUR 200 million of reinsurance protection to cover certain losses from European windstorms and Italian earthquakes, on an indemnity trigger and per-occurrence basis.
The European windstorm covered area includes Germany, as well as other countries that were particularly badly impacted by windstorm Bernd and the associated severe floods that followed.
But despite this and the fact Generali had said back in August that its reinsurance program would cap its losses from Bernd and the floods at EUR 100 million, it’s now clear the Lion III Re cat bond will not be affected, Artemis has learned.
Generali confirmed in a communication to its cat bond investors seen by this publication, that windstorm Bernd is not considered a European windstorm event for the purpose of the Lion III Re catastrophe bond notes.
For a European windstorm event to impact the Lion III Re cat bond notes we believe it would need to cause Generali a ground up loss of over EUR 600 million, while a flood loss would need to cost the insurer over a billion Euros.
Generali did not have much exposure in countries like Belgium, which were badly impacted by Bernd and the floods, so it’s possible the loss just didn’t get close to the attachment for the cat bond notes.