June 1st, 2015

GC Securities* Completes Catastrophe Bond Cranberry Re Ltd. Series 2015-1 Notes for the State of Massachusetts’s Residual Market Insurer

Posted at 11:30 PM ET

GC Securities, a division of MMC Securities Corp., a U.S. registered broker-dealer and member FINRA/NFA/SIPC, announced the placement of Series 2015-1 Class A Principal At-Risk Variable Rate Notes due July 6, 2018, with notional principal of USD 300,000,000, through a newly formed catastrophe bond shelf program, Cranberry Re Ltd., to benefit the Massachusetts Property Insurance Underwriting Association (MPIUA).

This is the second time that MPIUA has utilized the cat bond market to manage its natural peril risks and is the first catastrophe bond benefiting a residual market insurer to protect against multiple natural perils. MPIUA previously accessed the catastrophe bond market in 2010.

The Series 2015-1 Notes are positioned alongside MPIUA’s traditional reinsurance program to provide annual aggregate protection from tropical cyclones, tropical storms, hurricanes, severe thunderstorms and winter storms causing at least USD 10 million in losses to MPIUA. The Series 2015-1 Notes provide three years of risk transfer protection, and attach when MPIUA’s annual aggregate losses exceed USD 300 million, and exhaust when MPIUA’s annual aggregate losses exceed USD 1.4 billion.

GC Securities served as sole structurer and sole bookrunner. Hannover Rück SE serves as the transformer reinsurer facilitating MPIUA’s access to catastrophe bond-based risk transfer capacity.

RISK PROFILE

Series 2015-1 Notes

Size

Fitch Rating

Expected Maturity

Coupon

Class A Notes

$300,000,000

B sf

July 6, 2018

TMM earnings + 3.80%

John Golembeski, President, Massachusetts Property Insurance Underwriting Association, MPIUA, stated, “Catastrophe bond capacity has been instrumental this year in MPIUA’s transformation from a per occurrence to annual aggregate risk transfer program. In addition to diversifying counterparties and providing incremental capacity as we increased the limit we purchase with the change to an annual aggregate format, the catastrophe bond capacity provides key pricing guidance relative to traditional reinsurance pricing in order to achieve a cost-effective annual aggregate program. We value our key partners, Guy Carpenter, GC Securities and Hannover Rück SE, in order to achieve these results.”

Ulrich Wallin, CEO of Hannover Re, noted, “We are delighted that MPIUA has elected Hannover Re as its partner for transforming its second cat bond transaction. It demonstrates that Hannover Re can offer its trusted insurance clients the full suite of services, which will help us in strengthening our overall relationship with valued clients like MPIUA.”

David Priebe, Vice Chairman of Guy Carpenter, stated, “We are proud to have assisted MPIUA in the execution of its second catastrophe bond, which exemplifies the benefit of the convergence between the reinsurance and capital markets. This transaction demonstrates Guy Carpenter’s and GC  Securities’ expertise, as well as our commitment to assisting residual market insurers and other public entity clients in navigating and understanding innovative forms of risk transfer, and to finding the optimal form of risk mitigation from the vast array of potential solutions across all markets.”

Cory Anger, Global Head of ILS Structuring, GC Securities, noted, “We are honored to have brought MPIUA back to the catastrophe bond market and utilized catastrophe bond capacity to achieve MPIUA’s stated goals as MPIUA changed its reinsurance program to an annual aggregate structure. The Series 2015-1 bonds (as well as the Cranberry Re shelf program) provide the novel structural features to MPIUA, including the flexibility in how MPIUA can annually reset the layer and liquidity features that advance expected next 30 days’ worth of claims. As the first multi-peril residual market insurer catastrophe bond, MPIUA also did not have to utilize third party identification sources for identifying severe thunderstorms or winter storms. Instead, investors accepted MPIUA’s catastrophe code strategy, thereby removing a source of expense and complexity and bringing catastrophe bonds closer to traditional reinsurance structures.”

Chi Hum, Global Head of ILS Distribution, GC Securities, stated, “The capital markets investors were pleased to see MPIUA come back to the cat bond market after a hiatus of several years. The Massachusetts-only risk profile of these bonds is particularly useful for portfolio construction purposes and drove the strong support of the Series 2015-1 Cranberry Re Ltd. bond issuance. GC Securities is pleased to be able to bring the capital markets capacity and the value of diversification and collateralization to a well-structured reinsurance program.”

*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/NFA/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. (MMCSEL), which is authorized and regulated by the Financial Conduct Authority, main office 25 The North Colonnade, Canary Wharf, London E14 5HS. 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. **GC Analytics is a registered mark with the U.S. Patent and Trademark Office.

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