SCOR issues bond at Euribor plus 950bp after strong investor interest
The €75m Atlas VI cat bond, which came into the market recently, was closed for SCOR. BNP Paribas was joint book-runner and joint lead-manager.
Risk Management Solutions modelled the natural catastrophe risk. BNP Paribas also acted as collateral counterparty in the transaction.
Investor response to the deal was "very strong" said BNPP. The order book was over 2 times the target size of €75m at the tight end of price guidance (Euribor + 950-1050bp), allowing pricing at Euribor + 950bp. Investors were widespread internationally.
Under the terms of the transaction, SCOR has entered into a financial contract with Atlas VI Capital Ltd., which provides for payments up to €75m in the event of severe Europe Windstorm and Japan Earthquake Events between 10th December 2009 and 31 March, 2013. Atlas VI Ltd. has, in turn, transferred the risk to the capital markets through the issuance of catastrophe bond notes, which are expected to be rated BB- by Standard & Poor’s.
The performance of the notes will depend upon the performance of a Paradex index for Europe windstorm and a parametric index for Japan earthquake in the aggregate for each loss period. The notes are intended to respond in the event of windstorms and / or earthquakes occurring with a return period of between 1 in 33 and 1 in 47 years.
Atlas VI uses a repurchase agreement to manage its collateral. The repo mechanism was introduced by BNPP on Eurus II.
Mark Gibson, Head of Non-life Insurance Solutions, Capital Markets Structuring within Fixed Income at BNP Paribas said: “This transaction builds upon a series of successful Atlas transactions. Aggregate cover of this type is very useful protection for the sponsor, especially when it covers almost four Europe windstorm seasons. The use of Paradex for the Europe windstorm component enables SCOR to minimise basis risk. Investors appreciated the extra efforts made by RMS to improve the transparency of Paradex."