French reinsurer SCOR recently completed its first non-life Atlas catastrophe bond issuance, the extreme mortality-linked Atlas IX Capital Limited (Series 2013-1). Aon Benfield Securities, the capital markets and investment banking division of the reinsurance broker, structured the deal and acted as a bookrunner.
Through the transaction, SCOR receives $180m of U.S. extreme mortality retrocessional reinsurance cover, protecting it against mortality risks such as pandemics, natural catastrophe events and terrorist attacks. The deal has a long risk period from 1st January 2013 to 31st December 2018. Within that risk period are five overlapping two-year periods during which mortality losses can aggregate towards the trigger point. More on that structural feature can be found in this article.
Aon Benfield Securities said that the deal provides SCOR with collateralized extreme mortality protection against increases in U.S. mortality rates from any cause. The Atlas IX mortality cat bond was structured by Aon Benfield Securities to provide index-based protection to SCOR Global Life based upon mortality rates reported by the U.S. Centers for Disease Control and Prevention.
The Atlas IX transaction is the first time that SCOR has sought protection from the capital markets for its life reinsurance portfolio in catastrophe bond form and follows on from a strong issuing track record with the property catastrophe Atlas series of deals.
Aon Benfield Securities acted as the sole structuring agent and as a joint bookrunner for the Rule 144A transaction.
The transaction was well received by investors, according to Aon Benfield Securities. With a glut of property cat bonds in 2013 any opportunity to diversify was always going to be welcome. Mortality risks still only make up a small proportion of the cat bond market and there is definitely room for more issuance of this peril and investors have an appetite to support it.
Paul Schultz, Chief Executive Officer of Aon Benfield Securities, commented; “The offering of Atlas IX was very well received by investors, who appreciated the addition of a new sponsor to the extreme mortality bond market. The transaction was well received by the market and allowed SCOR to obtain meaningful coverage on very attractive terms.”
Other details from Aon Benfield Securities press release follow and more details on the underlying structure can be found in our previous article here:
The notes were issued by Atlas IX Capital Limited, an Irish private limited company, which was established for this transaction. Risk Management Solutions, Inc provided the risk modeling and analysis. The notes were priced at 3.25 percent above the return on the underlying collateral which is Medium Term Notes with an interest rate of three-month LIBOR minus 0.06%. The Medium Term Notes were issued by the European Bank for Reconstruction and Development (“EBRD”) which carries a Standard and Poor’s rating of AAA. The Atlas IX notes have a six-year risk period running from 1 January 2013 to 31 December 2018, with a scheduled maturity date of January 17, 2019 and were rated BB(sf) by Standard and Poor’s.