Swiss Re Insurance-Linked Fund Management

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VenTerra Re Ltd. cat bond brings Australian perils to market for QBE


According to sources an interesting catastrophe bond transaction has been launched for QBE insurance Group Ltd. The cat bond VenTerra Re Ltd. (Series 2013-1) will bring some welcome diversification to ILS investors through the inclusion of Australian perils.

VenTerra Re Ltd., a Bermuda domiciled SPI, will seek to issue a single tranche of Series 2013-1 notes in this cat bond issuance with a preliminary size of $200m. The coverage afforded by the notes benefit QBE Insurance Group subsidiaries and affiliates, but we understand that this is being achieved through a reinsurance agreement with QBE’s captive reinsurer Equator Reinsurance Ltd.

This is the first time that QBE has sponsored a catastrophe bond transaction and they may in fact be the first Australian insurer to tap the 144A cat bond market in its history. This shows a continued broadening of the issuer base which is very positive for the market.

The fully-collateralized, capital market backed, reinsurance protection gained through the VenTerra Re cat bond will cover QBE and subsidiaries against certain U.S. earthquake, Australian cyclones and Australian earthquake events for a three-year period. The reinsurance coverage provided will be on an indemnity and per-occurrence basis, Artemis understands.

The single tranche of notes have an attachment point of USD$1.5 billion for U.S. earthquake risks and AUD$4.25 billion for Australian cyclone and earthquake risks. The exhaustion points are USD$1.75 billion for U.S. earthquakes and AUD$4.5 billion for the Australian perils.

The attachment probability for the notes is 1.52%, the expected loss is 1.35% and the exhaustion probability is 1.21%. The notes are said to be being offered with price guidance of 3.75% to 4.5%.

Companies assisting with this transactions issuance are said to be Aon Benfield Securities as a structuring agent and bookrunner, Munich Re as a joint structuring agent and RMS as the risk modelling firm.

We understand that the targeted completion date for this cat bond is before the end of December, meaning that this will contribute to the 2013 cat bond issuance total.

That’s all the detail we have gleaned on this transaction for the moment. It’s interesting to see QBE come forwards as a sponsor of a catastrophe bond. This is the firms first time sponsoring a cat bond deal and VinTerra Re is one of only a handful of cat bonds containing Australian perils. The diversifying nature of the Australian risks will be appealing to ILS investors and should ensure this transaction is heavily subscribed to.

We’ll bring you more details on the VenTerra Re Ltd. (Series 2013-1) catastrophe bond as it comes to market. Full details for this transaction will be kept updated in our Deal Directory.

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