The Bermuda-based Catlin Group Limited announced that Catlin Insurance Company Ltd. of Bermuda has purchased coverage totaling $225 million under a catastrophe swap agreement in the event of severe US natural catastrophes over a three-year period.
Catlin Bermuda concluded a risk transfer agreement with Newton Re Limited, a special purpose reinsurer established in the Cayman Islands, enabling Catlin to access the capital markets. Newton Re in turn has issued $225 million of three-year principal at-risk variable rate notes in two classes, the proceeds of which will be used to provide collateral for Newton Re’s obligations to Catlin Bermuda under the risk transfer agreement. The Class A Notes, in the principal amount of $87.5 million, are exposed to earthquake events, the Class B Notes, in the principal amount of US$137.5 million, are exposed to US hurricane events.
A.M. Best Co. has assigned debt ratings of “bb+” to the $87.5 million Series 2007-1, Class A principal-at-risk variable rate notes and “bb-” to the $137.5 million Series 2007-1, Class B principal-at-risk variable rate notes. In addition Best noted that the “notes are the first series to be issued under the issuer’ s principal-at-risk variable rate note program,” and that additional notes may be issued under this program.
Catlin said the transaction provides the Company with “competitively priced and fully collateralized protection amounting to $87.5 million in the event of a severe US earthquake and $137.5 million in the event of a severe US hurricane. The coverage complements the catastrophe protection that Catlin purchases through the commercial reinsurance market as well as the three-year catastrophe swap agreement that Catlin Bermuda completed in November 2006.”
Group Chief Executive Stephen Catlin commented: “I am pleased to announce that Catlin has participated in another innovative transaction that will provide the Group with protection in the event of a severe earthquake or hurricane striking the United States. This transaction further strengthens Catlin’s ability to withstand claims from natural catastrophes and increases the security that Catlin provides both to its policyholders and its investors. The transaction provides Catlin with fixed-price protection for a three-year period, whilst mitigating the credit and dispute risks that are inherent in conventional reinsurance transactions.”
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