Swiss Re Insurance-Linked Fund Management

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Swiss Re completes $120m Successor X Ltd. catastrophe bond deal


Swiss Re have announced completion of their latest catastrophe bond transaction. Successor X Ltd. Series 2010-1, the second transaction under the Successor X Cayman Island SPV, is a three year multi-peril deal. The transaction provides Swiss Re with cover for a portion of their U.S. hurricane, European windstorm, California earthquake and Japanese earthquake risks.

The transaction is the first catastrophe bond to use an index based on the new PERILS AG European windstorm data. PERILS has been used before for industry-loss warranty contracts but never in a cat bond transaction. The market sees PERILS as a new data provider which could provide a similar service to PCS in the U.S.

With the losses experienced from European windstorms such as last years Lothar and the recent Xynthia having access to a quality industry-loss index of data, such as PERILS can provide, should see further Euro wind cat bonds issued in the future. The reports here that Swiss Re commented that neither of those severe storms would have triggered losses on this new cat bond however.

Further details on this transaction are available in our Deal Directory and you can read the full press release from Swiss Re below.

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Swiss Re places USD 120 million of natural catastrophe protection through Successor X Cat Bond programme; first cat bond to use PERILS index for European windstorm losses

29 Mar 2010

Swiss Re has obtained another USD 120 million protection through the Successor X natural catastrophe bond programme for North Atlantic hurricane, European windstorm, California earthquake, and Japan earthquake.

Swiss Re has entered into a transaction with Successor X Ltd. (“Successor X”) to receive up to USD 120 million of payments in the event of natural catastrophes such as North Atlantic hurricane, European windstorm, California earthquake, and Japan earthquake. The transaction covers a three-year risk period ending in March 2013. Successor X, in turn, has issued notes linked to this risk to the capital markets. Successor X is a special purpose vehicle with a flexible programme structure, which will allow subsequent issuances of notes.

Swiss Re has a strong track record of securitising its natural catastrophe risks, obtaining more than USD 1.6 billion of protection through prior Successor programmes. The current Successor X programme, with the first bond issued in December, securitises an additional USD 270 million for the company.

Swiss Re’s Chief Underwriting Officer Brian Gray explained that this is the first cat bond transaction issued using a European windstorm index based on PERILS industry loss estimates. “Swiss Re welcomes this independent industry initiative, and sees it as an important step towards more efficient and transparent risk transfer in Europe. We have supported PERILS from the very beginning, and this demonstrates our continued commitment to driving innovation in the ILS sector.”

The triggers for the other perils covered by this bond are based on parametric indices or modelled losses.

The Successor offering consists of three series of notes of USD 35, 40, and 45 million each. One class of the notes is rated “B-“ by Standard & Poor’s while the other classes are not rated. The collateral for this issuance of Successor X notes consists of treasury money market funds.

Swiss Re Capital Markets acted as sole manager and bookrunner on the note issuance. Risk modelling and analysis were performed by EQECAT, Inc.

Martin Bisping, Head of Non-Life Risk Transformation, said “Swiss Re employs the same rigid structuring processes and deep level of natural catastrophe expertise to minimize basis risk and create innovative risk transformation solutions for ourselves as we do for our clients. Managing complexity, basis risk and tail risk is part of our competitive advantage.”

The Successor X notes were sold in a private placement pursuant to Rule 144A of the U.S. Securities Act of 1933, as amended, (the “Securities Act”) and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.

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