Swiss Re has obtained USD 150 million protection for North Atlantic hurricane, European windstorm and California earthquake through the Successor X catastrophe bond programme.
Swiss Re has entered into a transaction with Successor X Ltd. (“Successor X”) to receive up to USD 150 million of payments in the event of certain natural catastrophes with focus on North Atlantic hurricane, European windstorm and California earthquake. The transaction covers a one year risk period ending in late 2010. Successor X, in turn, has issued notes linked to this risk to the capital markets. Successor X is a special purpose vehicle with a flexible program structure, which will allow subsequent issuances of notes.
Swiss Re has a strong track record of securitizing its natural catastrophe risks, obtaining over USD 1.6 billion of protection through prior Successor programmes.
Swiss Re’s Chief Underwriting Officer, Brian Gray, commented: “Insurance-linked securities are a cornerstone of Swiss Re’s hedging strategy. It helps us to manage peak natural catastrophe risk, lowers capital requirements and reduces earnings volatility. This solution increases our ability to assume risk from a broad spectrum of individual clients, and transform it to capital markets investors in a simple and standard format.”
The Successor offering consists of three series of notes of USD 50 million each. One class of the notes is rated “B-“ by Standard & Poor’s while the other classes were not rated.
All classes of notes were issued as discount notes. Instead of purchasing the note at 100% face value, investors purchased it at a discount and expect to receive 100% of the face value at maturity if no trigger event occurs. This innovative feature allows for a more efficient use of the cash proceeds in the transaction.
Swiss Re Capital Markets acted as sole manager and bookrunner on the note issuance. The collateral for this issuance of Successor X notes consists of treasury money market funds. Risk modelling and analysis was performed by EQECAT, Inc.
Brian Gray, concluded: “Natural catastrophe risk is core to our business. With lively investor interest and increasing convergence of the reinsurance and capital markets spheres, we see further potential to put our leading transformation capabilities to work for the benefit of both clients and shareholders.”
The Successor X notes were sold in a private placement pursuant to Rule 144A of the U.S. Securities Act of 1933, as amended, (the “Securities Act”) and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.
