Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Groupama extends catastrophe bond cover with Green Fields II Capital deal


French insurance and banking group Groupama is seeking to extend the cover it receives from the capital markets through catastrophe bond issuances with a new transaction, Green Fields II Capital Ltd. (Series 2013-1). The transaction will give the French insurer an expanded and extended source of French windstorm reinsurance coverage.

As with its earlier Green Fields Capital Ltd. cat bond deal, Green Fields Capital II Limited sees Groupama using Swiss Re as counterparty to the cat bond transaction while it sits as the ultimate benefitting reinsured party in the deal. Swiss Re is the sole structure and bookrunner on the transaction as well as the counterparty to the issuing SPV.

Green Fields Capital II Limited is an Irish domiciled SPV, the first Irish domiciled cat bond of 2013. In this transaction it will issue a single tranche of Series 2013-1 Class A notes, which has a preliminary size of €150m, making it also the first Euro denominated cat bond of 2013, with the aim of collateralizing the counterparty reinsurance agreement with Swiss Re who then ultimately provide the reinsurance protection to Groupama.

As the beneficiary of this deal Groupama is looking for a multi-year source, of fully collateralized reinsurance protection for certain French windstorm risks. The transaction will provide cover for some of Groupama’s residential, commercial, industrial and agricultural book of business across all of France. The deal will have a 3 and a half year term to the end of December 2016, we understand, so running for two years after its current Green Fields Capital Ltd. cat bond matures thus both expanding and extending its catastrophe bond coverage.

The deal will provide Groupama with coverage for French windstorm risks on a per-occurrence basis and will use an industry loss index trigger based on Cresta zone level European windstorm loss data from PERILS AG for the covered area of France. The transaction uses an index trigger with an attachment level of 573m index points and an exhaustion level of 745m index points.

The single tranche of notes have an attachment probability of 1.08%, an exhaustion probability of 0.66% and an expected loss of 0.85%. We’re told that the notes are being marketed with a coupon guidance price range of 2.75% to 3.25%.

As we said, Swiss Re Capital Markets is the sole structurer and bookrunner on this deal and we understand that RMS is providing risk modelling services.

This is the fourth catastrophe bond transaction that we have recorded in our Deal Directory which benefits Groupama. The first was Green Valley Ltd., issued in late 2007, followed by Green Valley Ltd. (Series 2) in September 2010 and then Green Fields Capital Ltd. (Series 2011-1) in December 2010. It’s encouraging to see the French mutual insurer return to the cat bond market again and given that this deal is thought to be relatively low risk, and provides diversification, we expect it to be well received by investors.

We hope to bring you more details on Green Fields II Capital Ltd. (Series 2013-1) as it comes to market.

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