Allianz is close to completing a $40 million catastrophe bond that will cover Europe’s biggest insurer against extreme losses from U.S hurricanes and earthquakes, investors said on Tuesday.
Investors say Allianz has been marketing its fourth series of Class B notes under its Cayman Islands special purpose vehicle Blue Fin Ltd since the beginning of April.
The bond will be priced at 850 basis points over U.S. Treasury money market funds, at the top end of the indicated range, said one UK-based investor familiar with the transaction.
Insurers and reinsurers use catastrophe bonds to transfer major risks on their books, such as for storms and earthquakes, to capital markets investors, thereby freeing up capital to underwrite new insurance business.
The bond will provide Allianz with aggregate protection against hurricanes in 31 U.S. states and certain earthquakes in the United States for two years until May 2013, said investors.
This is the same maturity date as Allianz’s Blue Fin Series 3 catastrophe bond, which provides $150 million of identical coverage through two tranches. That deal, which was sold in 2010, was designed to provide different cover to Allianz.
Allianz declined to comment.
Allianz is a regular issuer of cat bonds, and one of many primary insurers that have chosen to issue insurance-linked securities rather than relying solely on the reinsurance industry. Others include Assurant, Nationwide Mutual NMUI.UL and The Hartford.
The launch of the Series 4 Class B notes under Blue Fin Ltd would boost Allianz’s current catastrophe bond coverage to $190 million, with $100 million of cover on an aggregate basis against a series of events in a given year.
Aon Benfield, a unit of the world’s biggest insurance broker Aon, and Swiss Re are joint bookrunners and structuring agent for the latest Blue Fin Ltd transaction, while AIR Worldwide will provide the risk analysis.
The bond is expected to close on April 15, investors said.
The deal will bring 2011 catastrophe bond issuance to over $1 billion through five transactions.
Issuance is expected to reach $6 billion by the end of the year according to brokers and reinsurers.
Source : Reuters
