The FINANCIAL — Allianz has closed its first catastrophe bond (cat bond) transaction related to windstorm risks in seven European countries. Jay Ralph is CEO of the reinsurance division of Allianz SE Issued through Blue Fin Ltd., a Cayman Islands based special purpose entity, the bond has two tranches with an aggregate volume of 200 million euros and constitutes the first series under a program with an initial maximum size of one billion euros.
The cat bond transfers to investors the risks of windstorms in Austria, Belgium, France, Germany, Ireland, the Netherlands and the UK, and uses a parametric index trigger. The index is based on the measurement of wind speed at various locations.
"Insurance-linked securities like cat bonds offer protection for catastrophe risk and provide access to non-traditional retrocession capacity on a multi-year basis and with minimal credit exposure", said Jay Ralph, CEO of the reinsurance division of Allianz SE.
The securities issued by Blue Fin Ltd. are denominated in US dollars and euros and offer investors a coupon of 4.40 percent and 4.55 percent over the applicable reference rates LIBOR and EURIBOR, respectively. Both tranches are scheduled to be redeemed in 2012, and have received a rating of BB+ by Standard & Poor’s.
"Cat bonds offer us a valuable additional risk management instrument" explains Amer Ahmed, CRO of the reinsurance division of Allianz SE. "The Blue Fin program enables us to ease capacity constraints for one of our peak catastrophe exposures and to release risk capital."
According to Allianz Blue Fin Ltd. is to date the largest single placement of European windstorm risk in the market for insurance-linked securitization (ILS) and the second cat bond program sponsored by Allianz. In April this year, Allianz Global Corporate & Specialty sponsored an innovative transaction in which Blue Wings Ltd. raised 150 million US dollars to cover the risk of UK flood and North American earthquake, excluding California.
“The successful placement of the cat bond shows that investor demand for this type of securities continues to be strong and that this market segment has been largely unaffected by the recent turmoil in the financial markets. The market for cat bonds has grown strongly in the recent past. Allianz expects that the ILS market will continue to play an increasingly important role in the future of the insurance industry”, company said.
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