Swiss Re announces the successful closing of a USD 200 million insurance-linked securities offering of hurricane risk in North Carolina through Parkton Re Ltd. (Parkton Re), a Cayman Islands exempted company.
In this transaction, Swiss Reinsurance America Corporation will purchase reinsurance from Parkton Re, thereby transforming the proceeds of this catastrophe bond issuance into a source of capacity for a reinsurance agreement that provides the North Carolina Joint Underwriting Association (the FAIR plan) and North Carolina Insurance Underwriting Association (the Beach Plan, and the two are collectively known as the Associations) USD 200 million of coverage over two years. The Parkton Re Ltd. bond was issued in a single tranche, the Series 2009-1 Principal At-Risk Variable Rate Notes, that is scheduled to mature in May 2011.
Stefano Sola, Managing Director, Insurance-Linked Securities at Swiss Re Capital Markets, commented,“This is the first time that a collective pool in the US has accessed the capital markets for hurricane risk. We acted as the transformer between the Associations and Parkton Re, which helped the Associations to concentrate on their primary goal – accessing the capital markets for capacity – rather than focusing on the administrative details of the bond transaction. In addition, Parkton Re is the first cat bond that directly and exclusively references North Caroline hurricane risk, thereby providing investors with a new opportunity for portfolio diversification.”
The catastrophe bond uses an indemnity trigger, based on storm losses incurred by the Association. AIR Worldwide Corporation (AIR) provided the expert risk modeling analysis.
Tom Falkenbach, Chairman of the Beach and FAIR Plan Boards, stated, “The Associations are pleased to have obtained the capital market-based protection with the support of the investors, as well as of Swiss Re Capital Markets and GC Securities. This strengthens our claims paying abilities in the event of catastrophe wind losses and will help protect both our Policyholders and our Member Insurers.”
Swiss Re Capital Markets has acted as co-lead manager, initial purchaser and a bookrunner of Parkton Re. The details of the notes placed in the initial offering are the following:
The Parkton Re notes were sold in a private placement pursuant to Rule 144A of the U.S. Securities Act of 1933, as amended, (the “Securities Act”) and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.