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Swiss Re Successfully Places First Ever Bond Linked to Central American Earthquakes
22 January 2008
Swiss Re has successfully structured and placed USD 85 million of securities covering windstorm events in the United States as well as earthquakes in California and Central America.
The bond is the first ever linked to Central American earthquakes. The initial offering of notes by GlobeCat Ltd. closed on 21 December 2007. The risk modelling company EQECat was used as the calculation agent as well as for the initial risk analysis.
As part of an ongoing program, Swiss Re’s Capital Markets structured and placed the securitisation and acted as the sole book runner for the initial USD 85 million offering.
The first two tranches of the issuance cover losses due to catastrophic hurricanes and earthquakes in the United States. The third tranche covers the non-peak perils of Guatemala and EL Salvador earthquakes. The trigger is the first of its kind in that the index is based on the population exposed to certain levels of ground-shaking intensity as measured by the Modified Mercalli Intensity scale.
The goal of the GlobeCat Ltd securitisation is to create a platform and a model by which charitable foundations, governmental relief organizations and corporations can leverage donations or governmental/international funding to the benefit of developing nations affected by natural disasters. Such a program will help these organizations in becoming more pro-active in planning and anticipating relief needs in areas of the world affected by severe catastrophes. In case of a triggering event, the funds will be quickly available for relief efforts rather than being raised after the event.
The GlobeCat Securitization has shown that this concept is viable and that donation to coverage leverage can be as high as 45 times. (USD 1 million of donations can be used for USD 45 million in relief) Other triggers are being developed for a wide variety of disasters.
Details of the notes placed in the initial offering are:
Class |
Size in million |
Rating |
Expected Maturity |
Coupon |
LAQ |
USD 25 |
Ba3 |
30 Dec. 2008 |
3 month Libor + 210 b.p. |
USW |
USD 40 |
B3 |
02 Jan. 2013 |
3 month Libor + 925 b.p. |
CAQ |
USD 20 |
Ba1 |
02 Jan. 2013 |
3 month Libor + 600 b.p. |
(Source: Swiss Re)
For more information, contact:
Bob Healy
EQECAT, Inc.
1-510-817-3100 | rhealy@eqecat.com
Eric R. Samansky
The Samansky Group
1-516-319-0858 | eric@samanskygroup.com
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