Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

New Successor X Series 2011-3 cat bond being marketed for Swiss Re


Swiss Re are issuing another catastrophe bond under their Successor X Ltd. principal-at-risk variable-rate note program. Successor X Ltd. is a Cayman Islands domiciled special purpose vehicle. This will be the fifth issuance under the programme and this time they are issuing two tranches of notes, although we only have details on one of them as the second tranche will not be a rated issuance.

Successor X Ltd. Series 2011-3 features a $50m tranche of Class V-X4 notes which will be exposed to major U.S. hurricanes in selected states and also European windstorms in certain countries. The notes will have a term of four years from November 2011 until November 2015.

The second tranche of Class V-F4 notes are of an unknown size and cover unknown risks. We don’t currently have any information on this tranche of notes but hope to bring you details in the near future. Ratings agency Standard & Poor’s say that they will not be rating the V-F4 notes issued by Successor X.

The V-X4 notes issued by Successor X will provide Swiss Re with protection on a per-occurrence basis over the risk period North Atlantic U.S. hurricane and Europe windstorm, with a possible extension in three-month increments of up to 24 months for loss development and reporting purposes. European windstorm coverage is for Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden, Switzerland, and the UK. Atlantic hurricane coverage is for certain Gulf, Mid-Atlantic, Northeast, Southeast U.S. states and Florida and Puerto Rico.

This Successor X cat bond issuance will use AIR Worldwide risk models and calculation agent services, previous Successor cat bonds had used EQECAT for these services. U.S. hurricane risks will use a PCS industry loss index with predetermined payout factors and European windstorm risks will use the PERILS AG industry loss index, again with predetermined payout factors. The V-X4 notes will payout for an index value of higher than 612 to 830 for U.S. hurricanes and from 594 on a per-occurrence basis up to 759 for European windstorms.

Each year Swiss Re can opt to have the payout factors reset if they choose. There will be one mandatory reset on the 15th June 2013 to reset the industry exposure data. Swiss Re’s own investment banking division, Swiss Re Capital Markets, will be arranging this deal.

Proceeds of the sale of the notes will be invested in highly rated Treasury money market funds and the notes will pay investors interest at an undisclosed margin above the return of those funds.

Standard & Poor’s have given the single tranche of $50m Class V-X4 notes to be issued by Successor X Ltd. a preliminary rating of ‘B-‘.

It’s good to see Swiss Re returning to the cat bond market with another Successor X issuance. We’ll update you as the transaction comes to market and full details will be included in our catastrophe bond Deal Directory.

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