As part of its diversified risk management, Hannover Re has renewed its Eurus catastrophe bond issued in July 2006. The bond with a volume of EUR 150 million was placed with institutional investors in Europe and North America. “We are pleased that we succeeded in structuring an attractive transaction that met with keen interest among investors. We were able to place twice the originally planned amount of EUR 75 million at our preferred conditions”, Chief Executive Officer Ulrich Wallin explained.
Eurus II Ltd. provides cover from 30 July 2009 to 31 March 2012 against severe windstorm events in seven European countries (Belgium, Denmark, Germany, France, United Kingdom, Ireland, Netherlands). The performance of the bonds is linked to a wind speed index.
“This transaction strengthens our risk management and protects our capital against events with a return probability of between 50 and 80 years. We thus continue to be able to provide windstorm protection for our European clients”, Mr. Wallin affirmed.
The Eurus II transaction has received a preliminary rating of “BB” from the rating agency Standard & Poor’s. AIR Worldwide Corporation handled the modelling of the underlying risks.
The transaction was arranged by BNP Paribas and Aon Benfield Securities. Its insurance risk components are clearly and simply structured. Eurus II also benefits from an innovative repurchase agreement, under which BNP Paribas guarantees the minimum return on the portfolio and offsets any fluctuations in value on a daily basis. The investors’ paid-in capital is put into corporate and government bonds.