Chartris In Cat Bond Deal With Compass
Chartis announced it has entered into a reinsurance transaction with Bermuda’s Compass Re, which will provide $575 million of protection to Chartis against US hurricanes and earthquakes.
This represents a substantial increase from the $275 million of protection originally sought by Chartis. A division of AIG, Chartris is the property casualty insurance division of the global giant.
To fund its obligations to Chartis, Compass Re issued a catastrophe bond in three tranches — $75 million of Class 1 notes, $250 million of Class 2 notes and $250 million of Class 3 notes.
The transaction closed on December 1, 2011 and provides Chartis with fully collateralised coverage against losses from US hurricanes and earthquakes on a per-occurrence basis — under a reinsurance agreement related to the Class 1 notes — and a second and subsequent event aggregate basis — under reinsurance agreements related to the Class 2 and Class 3 notes — through December 2014 using an index trigger with state-specific payment factors.
Risk analysis for the transaction is based on AIR Worldwide Corporation’s CATRADER Model Version 13.0. This transaction follows Chartis’ two reinsurance transactions with Bermuda special purpose insurer Lodestone Re in 2010, which provided a total of $875 million of protection to Chartis, fully collateralised through catastrophe bonds issued by Lodestone Re, against US hurricanes and earthquakes.
Peter D. Hancock, CEO of Chartis, said, “We are pleased to be able to again obtain reinsurance supported by capital markets instruments as a mechanism to efficiently supplement and diversify Chartis’ risk management framework.”
Compass Re is a special purpose insurer, incorporated under the laws of Bermuda, which has established a programme structure enabling potential future catastrophe bond issuances.
