Compass Issues Hurricane Cat. Bond
A Bermuda reinsurer will provide $575 million in protection against hurricanes and earthquakes in the US for New York-based insurer Chartis.
The island’s Compass Re has issued a catastrophe bond to Chartis 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.
Under the agreement, Chartis will be protected with fully collateralised coverage against losses from US hurricanes and earthquakes through December 2014 using an index trigger with state-specific payment factors, according to the company.
It will be protected 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.
“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,” said Peter D. Hancock, CEO of Chartis, in a statement.
Compass Re is a special purpose insurer which established a programme structure enabling potential future catastrophe bond issuances.
This transaction follows Chartis’ two reinsurance transactions with Lodestone Re last year, which provided $875 million of fully collateralized protection to Chartis against US hurricanes and earthquakes.
