The California Earthquake Authority is seeking to raise about $150 million through a sale of catastrophe bonds to help it meet potential claims, market sources said on Friday, as reported in a Reuters article.
The bonds are to be sold through the CEA’s Bermuda-based Embarcadero Re vehicle, and offer protection against property damage in the event of a Californian earthquake, the sources said.
The CEA, publicly managed but privately funded, was set up to insure California homeowners against earthquake damage after the 1994 Northridge tremor prompted many commercial insurers to withdraw from the market.
Separately, Munich Re, the world’s biggest reinsurer, said it had raised $100 million of protection against European and U.S. windstorms by issuing cat bonds through its Bermuda-based Queen Street vehicle.
Cat bonds are sold by insurers to capital market investors such as pension funds, who receive an income in return for agreeing to pay some of the issuers’ claims if an earthquake or hurricane strikes. The complete Reuters article can be seen here.
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