Swiss Re Securitizes $85 Million in Wind and Quake Risks

January 24, 2008

Swiss Re has structured and placed $85 million worth of securities covering windstorm events in the US as well as earthquakes in California and Central America.

“The bond is the first ever linked to Central American earthquakes,” said the announcement. The initial offering of notes by GlobeCat Ltd. closed on Dec. 21, 2007. The risk modeling company EQECat is used as the calculation agent and for the initial risk analysis.

Swiss Re explained that “as part of an ongoing program,” its Capital Markets unit had “structured and placed the securitization and acted as the sole book runner for the initial $85 million offering. The first two tranches of the issuance cover losses due to catastrophic hurricanes and earthquakes in the United States.

“The third tranche is the first to cover exposures in Central America. The GlobeCat Ltd. LAQ tranche covers the non-peak perils of Guatemala and El Salvador earthquakes. The trigger is the first of its kind in that the index is based on the population exposed to certain levels of ground-shaking intensity as measured by MMI. The index is modeled after the PAGER system developed by the USGS within the Global ShakeMap program.

“The goal of the GlobeCat Ltd. securitization is to create a platform and a model in which charitable foundations, governmental relief organizations and corporations can leverage charitable donations or governmental/international funding to the benefit of developing nations affected by natural disasters. Such a program will help these organizations in becoming more pro-active in planning and anticipating relief needs in areas of the world affected by severe catastrophes. In case of a triggering event, the funds will be quickly available for relief efforts rather than being raised post-event.

“The GlobeCat Securitization has shown that this concept is viable and that donation to coverage leverage can be as high as 45 times. ($1mm of donations can be used for $45 million in relief) Other triggers are being developed for a wide variety of disasters.”

Source: Swiss Re –

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