Italian primary insurance company UnipolSai Assicurazioni S.p.A. demonstrated a long-lasting commitment to engaging with the insurance-linked securities (ILS) market with its recently completed EUR 100 million Azzurro Re II DAC (Series 2020-1) catastrophe bond, according to executives at Willis Re.
With the successful placement of the Azzurro Re II DAC cat bond transaction, UnipolSai secured a multi-year source of European earthquake risk reinsurance protection for the firms Italian portfolio of risk.
Willis Re Securities and Willis Re, the investment banking and ILS unit and reinsurance divisions of Willis Towers Watson, structured and placed the deal on behalf of sponsoring Italian financial services company Unipol Group.
The transaction represents the first time a multi-use program special purpose vehicle (SPV) structure has been registered for catastrophe bond issuance in Ireland, with the program structure now making it possible for UnipolSai to issue follow-on cat bonds much more speedily.
The Central Bank of Ireland approved the structure, which will provide UnipolSai with increased flexibility to issue future cat bonds through a “fast track” approval process, Willis Re Securities explained.
Quentin Perrot, head of ILS International at Willis Re Securities, commented, “We are honoured to have supported UnipolSai in their third 144A catastrophe bond transaction. For the first time, a cedant has put in place a Solvency II cat bond program, allowing for a fast and efficient process for future cat bond transactions, in compliance with the Solvency II regulation.
“This demonstrates the long-lasting commitment of UnipolSai to engage with the ILS community. As usual, the level of dedication of the UnipolSai team was key to obtaining this very good result.
“With this new issuance, Willis Re Securities maintains its unrivalled leadership position in the structuring and placement of European ILS transactions.”
Of course, cat bond program issuance is common-place in other domiciles, such as Bermuda and it’s actually a little surprising that the feature hasn’t been available in Ireland before.
But this is another factor that could draw other European issuers to look to Ireland as a domicile for catastrophe bonds, as it should reduce the cost of future issues once a program is established.
The structure of the Azzurro Re II cat bond provides UnipolSai with indemnity trigger and per-occurrence based coverage, on terms that follow its traditional reinsurance placement.
This helps to ensure the effective integration of the cat bond within UnipolSai’s overall property catastrophe reinsurance program, bringing it three-and-a-half-year’s of capital markets backed reinsurance protection against earthquake risk in Italy and neighbouring countries, that could affect its portfolio of property business.
Alkis Tsimaratos, Head of EMEA W/S at Willis Re, explained, “We are delighted to have assisted UnipolSai in their latest ILS transaction with Azzuro Re II. This is providing a three-and-a-half-year diversifying capacity at a fixed price, accessing ILS capital for their key natural peril, Italian earthquake, and integrating this with their main catastrophe reinsurance programme.
“UnipolSai has reconfirmed their strategy of developing a long-term partnership with ILS alongside their key reinsurers, whilst providing an element of stability to their future reinsurance budgetary planning ahead of unprecedented uncertainty in future market conditions. The unique setup of Willis Re Securities fully embedded in Willis Re allowed UnipolSai to get seamless advice on all aspects of this risk transfer solution which was successfully executed as planned.”