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
Topics: Swiss Re
More on Structured Products
Firm’s head of electronic trading says EU regulation choking options market liquidity
Roos to head equity sales and prime finance at Citi, and other moves
Many investors favour one approach over the other, belying their similar aims
Growth of renminbi assets ends Taiwan insurers' love affair with structured credit
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.