Swiss Re brings first Mediterranean quake bonds

Swiss Re, the Zurich-based reinsurance company, has announced the closing of what it claims is the first Mediterranean earthquake risk bond.

The bonds transfer serious earthquake risk in four Mediterranean countries – Turkey, Greece, Israel and Cyprus – and Portugal from Swiss Re to Medquake, a Cayman Islands-based special purpose vehicle. Medquake issued the notes for a period of three years.

$100 million worth of three-year notes were issued in two tranches, each of $50 million and rated by Standard and Poor’s. The BB-rated tranche paid a coupon of 355 basis points over Libor, while the B-rated tranche paid 510bp over Libor. The notes pay a quarterly coupon with no principal protection offered.

The structuring, placement and underwriting of the bonds was executed by Swiss Re Capital Markets, the New York-based investment-banking arm of Swiss Re. The notes are based on a parametric index, representing a weighted measure of earthquake activity in the region covered.

The notes pay the coupon unless the index goes above the trigger level, taking advantage of a more sophisticated modelling approach to the more usual pure parametric trigger. Swiss Re used parametric index triggers in a securitisation referencing flood bonds earlier this year. See Swiss Re plans first flood bond issue

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here