AIG announced that it has entered into a five-year reinsurance transaction with Tradewynd Re Ltd., which will provide $125 million of indemnity reinsurance protection against U.S., Caribbean and Gulf of Mexico named storms and U.S. and Canadian earthquakes.
A diversified portfolio of risks is reinsured under the transaction. Commercial lines coverages include commercial property, energy and engineered risks, marine and aviation. Consumer lines coverages include high net worth residential, auto, yacht and fine art. To fund its potential obligations to AIG, Tradewynd Re Ltd. issued a five-year, $125 million single tranche catastrophe bond.
The transaction closed on July 9, 2013 and provides AIG with fully collateralized coverage against losses from the events described above on a per-occurrence basis (under a reinsurance agreement related to the notes) through June 2018. The transaction also includes a feature that allows AIG to shift the covered layer up or down within pre-determined limits.
Tradewynd Re Ltd., a special purpose insurer incorporated under the laws of Bermuda, has established a program structure enabling potential future catastrophe bond issuances.
Source: American International Group, Inc. (AIG)
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