Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Swiss Re preparing Successor X Ltd. catastrophe bond for launch


Swiss Re is preparing to bring a new one year catastrophe bond to market in the very near future. Successor X Ltd., expected to be a $50m deal although that could rise before it is issued, will replace and update the existing Successor cat bond program with new indices and collateral structure. This transaction will provide cover on a per-occurrence basis to Swiss Re for California earthquakes and North Atlantic U.S. hurricanes until November 2010. The deal will have an option to extend this period by three-month increments of up to six months for the earthquake peril and 24 months for the hurricane peril.

Standard & Poor’s has assigned the single series of Successor X notes preliminary ratings of ‘B-‘ and placed it on CreditWatch with positive implications. The reasoning behind the CreditWatch is that EQECAT Inc. (who are providing risk modeling on the deal) is planning to release an updated risk model in the coming months and that could change the assumptions and loss curves for the quake risk which could in turn have an effect on the ratings.

The collateral backing this transaction is to be invested in direct government obligations such as treasury bills and all must be highly rated. This continues the trend for cat bond collateral to be invested in these highly secure assets to lower correlation to the financial markets.

Further details on this transaction are available now in the Artemis Deal Directory.

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