Reinsurer Swiss Re has placed the first bonds to combine natural catastrophe (nat cat) and mortality risk, obtaining US$200m in protection for North Atlantic hurricane and UK extreme mortality risk.
The bond issuance is comprised of two tranches of notes. The US$120m Class A notes, rated B+ by Standard & Poor’s (S&P), combine North Atlantic hurricane risk with UK extreme mortality risk. The second tranche, rated B- by S&P, provides US$80m in protection for North Atlantic hurricane risk.
“The combination of hurricane and mortality risk is a significant innovation in the insurance-linked securities [ILS] market,” said Martin Bisping, head non-life risk transformation at Swiss Re. “This innovation has provided Swiss Re with an efficient way of bringing risks to the capital markets, in a new combination that we believe is attractive to investors.”
The Class A tranche covers extreme mortality in the UK and complements the list of countries covered by Swiss Re’s previously-placed Vita programmes. The notes will run until the end of 2016, giving Swiss Re five years of protection for the life risk and four years for the non-life risk.
Matthias Weber, Swiss Re’s group chief underwriting officer, added: “Swiss Re’s innovative multi-peril bond has met strong investor interest, which reflects the continued growing trust in ILS. ILS remains a key part of Swiss Re’s life and non-life risk transformation strategy.”
The notes were placed through Swiss Re’s newly created special purpose reinsurance vehicle (SPRV), Mythen Re. The private placement closed on 5 November.