Reinsurer Swiss Re have successfully completed their latest catastrophe bond deal, securing themselves a multi-year $200m source of North Atlantic hurricane and UK mortality protection. Mythen Re Ltd. (Series 2012-2) is the first cat bond offering to combine natural catastrophe risk with extreme mortality in a single tranche of notes making this a step forward for the cat bond market and broadening the possibilities for future sponsors who may seek to replicate the structure.
This Mythen Re cat bond saw Swiss Re issue two tranches of notes, although they did begin marketing the transaction with three tranches but one was withdrawn. We understand this is a fairly common occurrence and Swiss Re like to test the appetite of investors with a range of investment options before continuing with the most promising.
The two tranches of notes issued were a $120m Class A tranche of notes, which were rated B+ by S&P, and combine PCS North Atlantic hurricane risk with UK extreme mortality risk within the single tranche on an aggregate basis. The second tranche, which were rated B- by S&P, provides $80m in protection for North Atlantic hurricane risk on a per-occurrence basis.
The dual-risk tranche offers investors something new within the catastrophe bond market and a certain degree of diversification over a pure aggregate hurricane tranche of notes. In this respect they should prove popular and are likely to find other sponsors seeking to replicate a dual-risk tranche of cat bond notes in future. The trigger for the dual-risk tranche is not an integrated trigger, combining the two perils, rather the single tranche provides separate cover for both perils.
Martin Bisping, Head Non-Life Risk Transformation, at Swiss Re said; “The combination of hurricane and mortality risk is a significant innovation in the ILS market. This innovation has provided Swiss Re with an efficient way of bringing risks to the capital markets, in a new combination that we believe is attractive to investors.”
Swiss Re said in a release that the Class A tranches UK mortality cover complements the list of countries covered by Swiss Re’s previously placed Vita programmes. The notes issued by Mythen Re will run until the end of 2016, giving Swiss Re 5 years of protection for the life (mortality) risk and 4 years for the non-life (hurricane) risk.
Matthias Weber, Swiss Re’s Group Chief Underwriting Officer, commented; “Swiss Re’s innovative multi-peril bond has met strong investor interest which reflects the continued growing trust in Insurance-Linked Securities. ILS remains a key part of Swiss Re’s Life and Non-life risk transformation strategy.”
The Cayman Islands Stock Exchange has admitted the Mythen Re Ltd. principal at risk variable rate notes program and the two tranches of Series 2012-2 notes to their official list.
You can read more information on this transaction in our catastrophe bond Deal Directory.