Swiss Re issues first cat bond with World Bank collateral

18/06/2009

Swiss Reinsurance America Corporation (Swiss Re America) has obtained $100m from Cayman-domiciled Calabash Re II to reinsure US hurricane and earthquake risks for ACE American Insurance Company and its affiliates.

The Calabash Re III catastrophe (cat) bond is the first to involve collateral that utilizes an investment in floating rate notes issued by the International Bank for Reconstruction and Development (IBRD) of the World Bank Group.

Swiss Re America will use the reinsurance purchased from the issuer as a source of capacity for a reinsurance agreement that provides $100m of coverage over three years.

The Calabash Re III bond was issued in two tranches, the Class A Series 2009-I Notes, covering US hurricane and earthquake risk, and the Class B Series 2009-I Notes, covering only US earthquake risk.

The cat bond uses the patent-pending Modelled Industry Trigger Transaction (MITT) trigger, which takes industry loss estimates from property claims services and weights them by the post-event modelled share of industry loss based on certain applicable portfolios.

Dan Ozizmir, managing director and head of Insurance Linked Securities at Swiss Re Capital Markets, said: “We are pleased to provide additional capacity with Calabash Re III. Combining MITT and the IBRD Note resulted in a substantially more efficient set-up for both investors and our valued client.”

The IBRD is an international organization established in 1945 and owned by 185 member countries and has a long-term foreign issuer credit rating of “AAA (stable outlook)” by Standard & Poor’s Ratings Services and a senior unsecured debt rating of “Aaa (stable outlook)” by Moody’s Investors Service.