Swiss Re places USD 120 million of natural catastrophe protection through Successor X Cat Bond programme; first cat bond to use PERILS index for European windstorm losses
29 March 2010, Zurich
Swiss Re has obtained another USD 120 million protection through the Successor X natural catastrophe bond programme for North Atlantic hurricane, European windstorm, California earthquake, and Japan earthquake.
Swiss Re has entered into a transaction with Successor X Ltd. (“Successor X”) to receive up to USD 120 million of payments in the event of natural catastrophes such as North Atlantic hurricane, European windstorm, California earthquake, and Japan earthquake. The transaction covers a three-year risk period ending in March 2013. 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 programme structure, which will allow subsequent issuances of notes.
Swiss Re has a strong track record of securitising its natural catastrophe risks, obtaining more than USD 1.6 billion of protection through prior Successor programmes. The current Successor X programme, with the first bond issued in December, securitises an additional USD 270 million for the company.
Swiss Re’s Chief Underwriting Officer Brian Gray explained that this is the first cat bond transaction issued using a European windstorm index based on PERILS industry loss estimates. “Swiss Re welcomes this independent industry initiative, and sees it as an important step towards more efficient and transparent risk transfer in Europe. We have supported PERILS from the very beginning, and this demonstrates our continued commitment to driving innovation in the ILS sector.”
The triggers for the other perils covered by this bond are based on parametric indices or modelled losses.
The Successor offering consists of three series of notes of USD 35, 40, and 45 million each. One class of the notes is rated “B-“ by Standard & Poor’s while the other classes are not rated. The collateral for this issuance of Successor X notes consists of treasury money market funds.
Swiss Re Capital Markets acted as sole manager and bookrunner on the note issuance. Risk modelling and analysis were performed by EQECAT, Inc.
Martin Bisping, Head of Non-Life Risk Transformation, said “Swiss Re employs the same rigid structuring processes and deep level of natural catastrophe expertise to minimize basis risk and create innovative risk transformation solutions for ourselves as we do for our clients. Managing complexity, basis risk and tail risk is part of our competitive advantage.”
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.
Notes to editors
Swiss Re Swiss Reinsurance Company Ltd
Swiss Re is a leading and highly diversified global reinsurer. The company operates through offices in more than 20 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company’s traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated “A+“ by Standard & Poor’s, “A1” by Moody’s and “A” by A.M. Best.
Sucessor X Ltd
Successor X Ltd. is a Cayman Islands exempted company financed through the offering of insurance-linked securities.
More about PERILS
Cautionary note on forward-looking statements
Certain statements and illustrations contained herein are forward-looking. These statements and illustrations provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact. Forward-looking statements typically are identified by words or phrases such as “anticipate“, “assume“, “believe“, “continue“, “estimate“, “expect“, “foresee“, “intend“, “may increase“ and “may fluctuate“ and similar expressions or by future or conditional verbs such as “will“, “should“, “would“ and “could“. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re’s actual results, performance, achievements or prospects to be materially different from any future results, performance, achievements or prospects expressed or implied by such statements. Such factors include, among others:
- the direct and indirect impact of the continuing deterioration in the financial markets and the efficacy of efforts to strengthen financial institutions and stabilize the credit markets and the broader financial system;
- changes in global economic conditions and the effects of the global economic downturn;
- the occurrence of other unanticipated market developments or trends;
- Swiss Re’s ability to maintain sufficient liquidity and access to capital markets, including sufficient liquidity to cover potential recapture of reinsurance agreements, early calls of debt or debt-like arrangements and collateral calls under derivative contracts due to actual or perceived deterioration of Swiss Re’s financial strength;
- the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, credit spreads, currency values and other market indices, on Swiss Re’s investment assets;
- changes in Swiss Re’s investment result as a result of changes in its investment policy or the changed composition of Swiss Re’s investment assets, and the impact of the timing of any such changes relative to changes in market conditions;
- uncertainties in valuing credit default swaps and other credit-related instruments;
- possible inability to realize amounts on sales of securities on Swiss Re’s balance sheet equivalent to its mark-to-market values recorded for accounting purposes;
- the outcome of tax audits, the ability to realize tax loss carry forwards and the ability to realize deferred tax assets (including by reason of the mix of earnings in a jurisdiction or deemed change of control), which could negatively impact future earnings;
- the possibility that Swiss Re’s hedging arrangements may not be effective;
- the lowering or loss of one of the financial strength or other ratings of one or more companies in the Group;
- risks associated with implementing Swiss Re’s business strategies;
- the cyclicality of the reinsurance industry;
- uncertainties in estimating reserves;
- the frequency, severity and development of insured claim events;
- acts of terrorism and acts of war;
- mortality and morbidity experience;
- policy renewal and lapse rates;
- extraordinary events affecting Swiss Re’s clients and other counterparties, such as bankruptcies, liquidations and other credit-related events;
- political risks in the countries in which Swiss Re operates or insures risks;
- the impact of current, pending and future legislation and regulation affecting us or our ceding companies, and regulatory and legal actions;
- the impact of significant investments, acquisitions or dispositions, and any delays, unexpected costs or other issues experienced in connection with any such transactions, including, in the case of acquisitions, issues arising in connection with integrating acquired operations;
- changing levels of competition; and
- operational factors, including the efficacy of risk management and other internal procedures in managing the foregoing risks.
These factors are not exhaustive. We operate in a continually changing environment and new risks emerge continually. Readers are cautionednot to place undue reliance on forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
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