Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Three new catastrophe bonds begin marketing


The pipeline for new catastrophe bond issuance in 2012 is beginning to look very busy with deals launching in the last week and hoping to complete quickly.We know of three new transactions which are currently being marketed and hear of more which should launch soon, possibly by month end. The three transactions which are actively being marketed to investors at the moment are all from established cat bond sponsors and all include natural perils, but have enough of a variety of risks and types of trigger to be quite attractive at this time to the investment community.

The first transaction is another offering from reinsurer Swiss Re through their Successor X Ltd. Cayman Islands SPV. This is the sixth transaction under the Successor X programme, details of all the others can be found in our Deal Directory. Successor X Ltd. Series 2012-1 is seeking to issue three tranches of notes to secure additional multi-peril coverage for Swiss Re over a three year period. One tranche covers U.S. hurricanes, another covers U.S. hurricane and European windstorm risks while the third covers U.S. hurricane, European windstorm and California earthquake risks. All tranches are industry-loss based and provide coverage on a per-occurrence basis. The U.S. hurricane and California quake risks are using a PCS industry-loss trigger while the European windstorm coverage involves a PERILS industry loss trigger. The size of this deal is as yet unknown to us. We believe this should be the first of the three deals to close.

The second transaction being actively marketed is a third cat bond offering from U.S. specialty insurer Assurant. Following on from their Ibis Re Ltd. Series 2009-1 and Ibis Re Ltd. Series 2010-1 transactions, Assurant have now established a new Cayman Islands SPV Ibis Re II Ltd. which will seek to issue two tranches of Series 2012-1 notes in this current deal. Both tranches will provide U.S. hurricane cover to Assurant over a three year period and on a per-occurrence industry loss basis. Interestingly this deal uses the new Verisk Catastrophe Index for the trigger and is the first cat bond to do so, giving them county-weighted loss data which should make the transaction quite robustly modeled. The two tranches are said to be sized at $70m and $30m giving Assurant another $100m of cat bond cover (although of course it could well upsize with demand).

The third transaction currently in the market is a cat bond being sponsored by Hannover Re on behalf of Japanese reinsured beneficiary Zenkyoren. It’s encouraging, and not altogether surprising, to see Zenkyoren return to the cat bond market after their Muteki cat bond became a total loss after the Japanese earthquake last March. It’s also encouraging to see Japanese quake risk back in the cat bond market and it will be interesting to see how investors receive this. The transaction is being issued by a Caymans SPV called Kibou Ltd. which is seeking to issue a single tranche of notes exposed to Japanese earthquake risks on a per-occurrence basis. The Kibou Ltd. cat bond will use a parametric index trigger to measure Japanese quake exposure and losses. Again, we don’t have details of the size of this transaction but will update you when they become available.

These three cat bonds offer a diverse selection of risks, geographies and triggers which should please investors looking to deploy capital in 2012.

We only have limited information on the three new transactions from conversations with various contacts but we will update you as and when more detailed descriptions of the three transactions become available. Each of them has been added to our comprehensive catastrophe bond Deal Directory and the information there will be added to as it becomes available.

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