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Louisiana Citizens to sponsor first catastrophe bond, Pelican Re Ltd.


Market sources have told us that another of the large U.S. State non-profit insurers has decided to tap the capital markets for a portion of its reinsurance cover this year. Louisiana Citizens Property Insurance Corporation, a non-profit insurer of last resort for the residential and commercial property owners in the state of Louisiana who aims to provide property insurance to those who can’t procure it through the traditional insurance marketplace, is said to be sponsoring a U.S. hurricane catastrophe bond called Pelican Re Ltd.

Pelican Re Ltd. is a recently registered Cayman Islands domiciled special purpose insurer set up to issue cat bonds on behalf of Louisiana Citizens. It has likely been established as a shelf program to allow future issuances to be made more easily and cheaply, which tends to be the way non-profit organisations access the cat bond market.

The Pelican Re cat bond, which we’re told is aiming for around $100m of cover, will provide Louisiana Citizens with three years of cover for hurricanes affecting Louisiana state on an indemnity basis according to our sources, with any losses closely tied to Louisiana Citizens ultimate net losses from an event. Coverage is on a per occurrence basis.

We’re told that the deal will have a low attachment point as Louisiana Citizens are seeking a robust level of cover from even smaller hurricanes which affect the state, as a result it’s expected this deal will pay a high coupon and so should be attractive to investors. It will also likely be attractive as it offers some level of diversification from broader U.S. hurricane cat bonds.

It’s encouraging to see Louisiana Citizens bring a catastrophe bond to market as many of the non-profit state hurricane insurers have been discussing the capital markets in recent months. Florida Citizens next perhaps?

That’s all the details we have at this stage for this latest cat bond to hit the market in 2012. We hope to be able to bring you more details on Pelican Re as it comes to market and we’ll update the transaction in our Deal Directory as new information becomes available.

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