$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