Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Swiss Re marketing the first catastrophe bond of 2011, Successor X Ltd. 2011-2


After the flurry of catastrophe bond deals which closed during December 2010, January 2011 has seemed a little quiet so far. Now Swiss Re have kicked off the 2011 catastrophe bond market with a new issuance under their Successor X Ltd. Cayman Islands domiciled special purpose vehicle. This will be the fourth issuance under the Successor X program of cat bonds.

Successor X Ltd. Series 2011-2 is the first cat bond to be marketed so far in 2011. This new series of cat bond notes is designed to provide Swiss Re with protection on a per-occurrence basis for North Atlantic hurricane risks in certain U.S. states and Puerto Rico and major earthquake risk in California. The deals size has not been publicised. The cover will run for three years and is expected to mature in February 2014 (with room to extend by up to 24 months for losses to develop and be calculated.

EQECAT are acting as calculation and reset agent for the transaction. Successor X 2011-2 will use an industry-loss index based on actual losses reported by Property Claims Services (PCS) for the North Atlantic hurricane risk. The California earthquake risk will utilise a parametric trigger based on residential, commercial, and fire-following losses and also one-second spectral acceleration data from the USGS. We hope to bring you more details on the risk modelling approach as this deal comes to market.

Collateral will be invested in highly rated International Bank for Reconstruction and Development putable notes. The deal has been structured in a single tranche of class IV-E3 notes which Standard & Poor’s has given a preliminary rating of ‘B’.

It’s encouraging to see the cat bond market come back to life in 2011. Industry sources tell us that other deals should come to market in the next month. As ever you can read about this and other catastrophe bond transactions in our Deal Directory.

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