Joint bookrunners Deutsche Bank and GC securities for $120m cat bond
Allianz Risk Transfer has closed a $120m cat bond for hurricane risk in coastal areas of the southeastern US.
Part of an open-ended programme, this is the first series of notes issued by Blue Coast, a special purpose vehicle launched for the benefit of the Allianz Risk Transfer group.
"Cat bonds offer us a valuable tool to manage residual retained risk in our proprietary and client books," said Chris Fischer Hirs, CEO of Allianz Risk Transfer.
The Bermuda-based company is the first sponsor to utilise an innovative trigger structure which allocates industry losses at the county level along coastal areas of the southeastern US. The structure allows ART to create a bespoke hedging solution which can be designed to closely match the company’s underlying portfolio whilst providing a transparent industry loss index product to investors.
"By calibrating the trigger structure of the cat bond protection at a county level, rather than a state level, we can improve our ability to hedge certain underlying US hurricane risks and manage our balance sheet while better minimising and managing our basis risk relative to other non-indemnity hedging alternatives," said Bill Guffey, head of Allianz Risk Transfer’s insurance-linked securities business.
The three classes of securities issued by Blue Coast Ltd. are denominated in US dollars and offer investors a coupon of 9.52, 14.75 and 18.89 percentage points over three-month LIBOR. The notes are scheduled to be redeemed in December 2010, and have received ratings of BB-, B+ and B from Standard & Poor’s.
Allianz sponsored two previous cat bond transactions in 2007, Blue Wings (sponsored by Allianz Global Corporate & Specialty) and Blue Fin (sponsored by the reinsurance division of Allianz). This is the Allianz Group’s first cat bond transaction in 2008.
Allianz Risk Transfer (Bermuda) Limited worked with Deutsche Bank and GC Securities (an affiliate of Guy Carpenter) to structure and place the transaction. The transaction utilises industry losses provided by PCS and modelling provided by AIR, two leading service and data providers in the catastrophe bond and reinsurance markets.