GC Securities, a Division of MMC Securities Corp., Announces Completion of 144A Catastrophe Bond – Parkton Re Ltd.
First-Ever State Windpool Cat Bond Transaction Provides
Per-Occurrence Ultimate Net Loss Protection for North Carolina Hurricane Peril
Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist, and GC Securities, today announced the completion of a $200 million issuance from a new 144A catastrophe bond program, Parkton Re Ltd., a Cayman Islands exempted company, to benefit the North Carolina Joint Underwriting Association and the North Carolina Insurance Underwriting Association (collectively the NC JUA/IUA). This program is the first-ever 144A catastrophe bond program to be established for the benefit of a state’s residual market pool to manage its hurricane risk.
GC Securities assisted the NC JUA/IUA in securing the transforming reinsurer and facilitating the transfer of the catastrophe risk to Parkton Re Ltd. GC Securities also served as co-lead manager and joint bookrunner on the note issuance as well as joint structuring agent of the catastrophe bond program. The note issuance ultimately provides the NC JUA/IUA with $200 million of fully collateralized, per-occurrence protection through May 1, 2011 against the effects of North Carolina hurricane risk.
The catastrophe bond utilizes an indemnity trigger structure based on the Ultimate Net Loss of the NC JUA/IUA in the event of a hurricane. The flexible structure allows for the bifurcation of capital at different cost implications upon the occurrence of covered events into (i) capital used for loss development for prior covered events, and (ii) remaining capital available for future covered events. Additionally, a new feature has been incorporated to allow for the release of non-needed capital if the bond is extended beyond the risk period for claims development.
The note issuance is rated B+ by Standard & Poor’s.
Tom Falkenbach — Chairman of the Beach and FAIR Plan Boards and Allstate Insurance Company’s Field Product Manager for the Southeast Region
“The issuance of this catastrophe bond is an important expansion of the NC Beach and FAIR Plans’ hurricane loss financing capability. Along with the traditional reinsurance program, this capital market-based protection provides additional claims-paying ability for policyholders in the event of a major hurricane and also may lessen the financial impact on member insurers.”
Dewey Meshaw, General Manager, NC JUA/IUA
“Features of this cat bond that make it appealing include the diversification it brings to the Associations’ overall catastrophe loss financing program, its multi-year coverage, an indemnity trigger, and protection through collateralized reinsurance.”
Cory Anger, Global Head of ILS Structuring, GC Securities
“This transaction successfully balances the structural needs of the NC JUA/IUA within its overall catastrophe loss financing program, while meeting investors’ diligent structural requirements. The new structural features demonstrate the continued evolution of catastrophe bond structures for sponsors and are proof that the cat bond market can be tailored for new sponsors.”
Chi Hum, Global Head of Distribution, GC Securities
“The investors found the single state wind risk useful for portfolio construction purposes and were pleased to support a first-time issuer that was looking to integrate capital markets access into its reinsurance capacity purchase program. The favorable price and size execution are strong signals to sponsors like the NC JUA/IUA that the capital markets can be comfortable with residual markets’ risk and be instrumental in optimizing protection programs.”
David Priebe, Chairman of Global Client Development, Guy Carpenter
“All of the parties involved — the North Carolina JUA/IUA, GC Securities, Guy Carpenter’s broking team, and Swiss Re Capital Markets - worked together seamlessly to ensure a successful transaction. The coordinated teamwork has led to an unprecedented cat bond program that will truly benefit the marketplace.”
Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product. Cory Anger and Chi Hum are registered representatives of MMC Securities Corp.