The recent completion of the world’s first pure volcanic risk catastrophe bond is a demonstration of Guernsey’s insurance-linked securities (ILS) credentials, Paul Sykes, Managing Director at Aon has said.
The volcano catastrophe bond, which was issued on behalf of sponsoring organisation the Danish Red Cross, was domiciled in Guernsey and drew on various areas of the islands insurance and reinsurance legislation.
Guernsey Finance called the deal a world first in sustainable finance, with the first humanitarian catastrophe bond completed using a Guernsey domiciled insurance-linked securities (ILS) structure.
The volcano cat bond notes were issued through Guernsey based reinsurance structure Dunant Re IC Limited, which is an Incorporated Cell of Replexus ICC (Guernsey) Limited.
This is the private ILS, cat bond and collateralised reinsurance issuance structure of Replexus Group, an insurance-linked securities (ILS) risk securitisation facilitator and risk transfer consultancy set up by Cedric Edmonds.
Replexus’ reinsurance transformer vehicle is managed by Aon Insurance Managers in Guernsey and Paul Sykes explained, “We are excited to have been involved in another first for the ILS market supporting Replexus on the establishment and management of Dunant Re IC Limited.
“The transaction demonstrates Guernsey’s credentials in the ILS and Sustainable Finance space which we expect to grow significantly in the future.”
Guernsey Finance Chief Executive Rupert Pleasant also commented on the ground-breaking cat bond issuance, “We have been watching the development of this with great interest. What a great result for the Danish Red Cross, Replexus and for Guernsey – this is a world first and truly unique example of sustainable finance in the humanitarian market.”
Guernsey Green Finance Chair Dr Andy Sloan added, “Guernsey’s leadership and innovation across ILS, technology and sustainable finance was absolutely central to this bond issuance, which provides opportunity for investors to support NGOs responding to different types of CAT risk.”
While a small transaction, at just $3 million in size, the way the cat bond has been issued using a cell structure in a reinsurance vehicle and having its notes settled using the ILSBlockchain owned by Replexus, is innovative and shows a way for ILS issues to be completed efficiently and with savings for sponsors.