A major force in a strong market

The ILS sector held its value well during the financial downturn and emerged stronger than before. New issuance exceeded USD 3.5 billion in 2009 and many new issues in 2009 were upsized, reflecting strong market conditions and investor demand.

Of the deals in 2009, our capital markets affiliate managed more deals than any other firm, giving Swiss Re over 51% of the market share for those ILS transactions.

Client solutions: Calabash Re III Ltd.

Swiss Reinsurance America Corporation acted as transformer, providing the client, ACE American Insurance Company, with protection based on its actual losses and hedging the risk to the capital markets in index form, retaining the basis risk.  An affiliate of Swiss Re was the sole manager for the transaction and placed the securities with a diverse group of international investors. The cat bond used the Modeled Industry Trigger Transaction (MITT) trigger developed by Swiss Re for the first Calabash transaction in 2006. This trigger works using a combined modeled loss and industry index trigger (or PCS trigger) to minimize basis risk more effectively than other non-indemnity triggers.

The collateral for the Calabash Re III Ltd. cat bond, purchased with proceeds of the bond issuance, utilized an investment in floating rate notes issued by the International Bank for Reconstruction and Development (“IBRD”) of the World Bank Group that are puttable in whole or in part at the option of the holder after the first year. This collateral investment represented a market first.

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