Hannover Re has issued a $160 million securitization of catastrophe risks. Hannover described the issue as the completion of its “K3” transaction, being composed of a variety of non-proportional reinsurance of natural perils (hurricanes and earthquakes in the United States, windstorms in Europe and earthquakes in Japan) and worldwide aviation business.
Alternative Risk Transfers
Mercantile exchanges to commence trading of catastrophe futures
In an interesting form of alternative risk transfer, the Chicago Mercantile Exchange announced that it will commence trading Hurricane index futures and options contracts to hedge hurricane risks. A press release describes the financial instruments generally, while a separate page on the CME’s web site provides more detailed information. At about the same time, the New York Mercantile Exchange announced plans to trade futures contracts based upon the risk of catastrophic property damage from natural disasters. Weather futures are now traded on the Chicago Board of Trade, a NYMEX company. The two exchanges will trade somewhat different types of contracts, based upon different risks. It will be interesting to see what effect, if any, these offerings have on the reinsurance market.
Tokio Marine places securitization of typhoon risks
Tokio Marine & Nichido Fire Insurance Co. has arranged reinsurance cover for approximately $200 million of typhoon risks by means of a securitization. Swiss Re accepted reinsurance of the risks and transferred the risks to a special purpose Cayman Islands company which issued the securities. The five year, BB+ rated securities transaction was designed and sold with the assistance of SwissRe Capital Markets Corporation.
Alternative Risk Transfer portal
Artemis describes iteself as “the Alternative Risk Transfer Portal.” It contains a directory describing numerous alternative risk transfer financing transactions, and provides visitors with an oportunity to subscribe to a news feed of alternative risk transfer deals.
Endurance places $235 million cat bond
Endurance Specialty Insurance Ltd. (“Endurance”) has acquired $235 million of protection for California earthquake and U.S. hurricane risks, financed through a risk-linked securities program. Endurance, a unit of Bermuda-based Endurance Specialty Holdings Ltd., bought the coverage from Cayman Islands-based Shackleton Re Ltd. Shackleton Re financed the reinsurance through the issuance of a $125 million catastrophe bond and a $110 million multi-year risk-linked credit facility. Endurance’s new reinsurance program has three separate layers of coverage, including: $125 million of reinsurance to cover California earthquake risk for 18 months; $60 million of coverage for U.S. hurricanes in the North Atlantic, Gulf Coast, and certain inland regions for two years; and $50 million of reinsurance for California earthquake or U.S. hurricane losses, occurring within a year of a similar catastrophe, for two years.