Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Longpoint Re II Ltd. catastrophe bond being marketed by Travelers


The tail end of 2009 is proving to be an extremely busy time for the catastrophe bond market, compare it to last year when no deals were issued beyond August and it looks like a different market completely. The latest transaction to be launched is Longpoint Re II Ltd. from Travelers Indemnity Company.

Longpoint Re II Ltd. is a Cayman Islands SPV set up to allow Travelers to transfer $250m of its hurricane risks to the capital market. The deal is expected to complete by the end of the year and is structured in two tranches of notes ($100m Class A and $150m Class B). The Class A notes provide 3 years of  protection on a per-occurrence basis against certain U.S. hurricanes, the Class B notes provide similar protection but over a 4 year risk period.

The trigger for the deal is based on the sum of PCS personal and commercial property losses within the defined risk zones and there will be an initial index trigger value of $2.25b. Interestingly, this transaction doesn’t target the normal hurricane risk zones of Florida and Gulf Coast; rather this deal provides Travelers with cover against hurricane losses in the east coast states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. That should help attract investors looking to diversify their hurricane risks away from the southern states. Collateral for the deal will be invested in Treasury money market funds which are stable and have a high rating.

Standard & Poor’s has rated the both the Class A and Class B tranches of notes ‘BB+’.

Further information on this deal can be found in our Deal Directory.

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