Here we review GC Capital Ideas posts on GC Securities* placement of catastrophe bonds completed over the first six months of 2016.
Posts Tagged ‘catastrophe bonds’
Earthquake Coverage in Japan, Part II: Residential, Commercial, Industrial and Earthquake Fire Expense Insurance
The other source of residential earthquake insurance is through a limited number of cooperative insurers. As opposed to residential earthquake insurance under the government’s program, cooperative earthquake insurance is entirely run and managed by each individual cooperative insurer that writes the class, with no governmental support. The original policy terms tend to be somewhat similar in basic design to those of the government’s program backed policies, but reinsurance arrangements are entirely at the discretion of the individual cooperatives. Almost all the cooperatives writing this class purchase non-proportional reinsurance from the international reinsurance market and, in certain cases, also access the capital markets for protection via catastrophe bond issuance.
GC Securities* Completes Catastrophe Bond First Coast Re Ltd. on Behalf of Security First Insurance Company
GC Securities, a division of MMC Securities LLC, a U.S. registered broker-dealer and member FINRA/NFA/SIPC, today announced the placement of a single class of the Series 2016-1 Notes with principal amount of USD75,000,000 through the newly formed special purpose insurer domiciled in Bermuda, First Coast Re Ltd., to ultimately benefit Security First Insurance Company (”SFIC”) in SFIC’s first use of catastrophe bond-based reinsurance.
GC Securities, a division of MMC Securities LLC, a U.S. registered broker-dealer and member FINRA/NFA/SIPC, today announced the placement of a single class of Principal At-Risk Variable Rate Notes (”Notes”) with a principal amount of USD 190,000,000 through the newly formed designated activity company (”dac”) domiciled in Ireland, Queen Street XII Re dac, to benefit Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München (”Munich Re”). This is the largest issuance of the eleven issuances in Munich Re’s Queen Street series since 2011 and the second largest issuance of all Munich Re’s Queen Street series. Additionally, Queen Street XII Re dac is the first special purpose vehicle authorized for the purposes of Directive 2009/138/EC (as amended) (”Solvency II Directive”) in the 144A catastrophe bond market.
Fiscal constraints are increasing across many developed and emerging economies amid growing catastrophic loss potential brought on by the geopolitical climate, demographic trends and global climate change. As a result, heads of government, international trade organizations and private sector risk bearers are increasing their calls to reexamine the roles and responsibilities of society to better manage these complicated risks.
The recent 2015 reinsurance renewals in this area demonstrated further expansion in the manner and means by which these insurance providers utilize private-sector capital to support their businesses. Traditional reinsurance remains a core component of most residual market risk financing programs. Typically these risk financing plans will also rely on retained profit, assessments and debt facilities in concert with the various forms of reinsurance to manage their exposures. The utilization of alternative risk financing capital through catastrophe bonds and/or collateralized reinsurance continues to grow with eight of 12 facilities that utilize traditional reinsurance also accessing risk transfer capacity through catastrophe bonds and/or collateralized reinsurance to help manage their loss exposures. The chart below details the increasingly diverse set of risk financing approaches employed by 11 coastal markets.
The US residual property insurance market segment is comprised of Fair Access to Insurance Requirements (FAIR) Plans, Beach and Windstorm Plans and two state run insurance companies - Florida Citizens Property Insurance Company (Florida Citizens) and Louisiana Citizens Property Insurance Corporation (Louisiana Citizens). These insurance facilities grew out of the civil strife in the 1960s to ensure continued access to insurance in urban areas. Over time they have evolved and their mandate has grown beyond their urban focus. Today these facilities are significant providers of some of the most wind- and earthquake-exposed property insurance in the country.
From one of GC Capital Ideas’ more popular categories, we highlight the top Chart Room stories viewed during the first quarter of 2016:
1. Global Property Catastrophe ROL Index 1990 to 2016: The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) index is presented for 1990 through 2016.
2. Regional Property Catastrophe ROL Index, 1990 to 2016: The chart shows the indexes for United States, United Kingdom, Asia Pacific and Europe.
3. Top Ten Catastrophe Bond Transactions for 2015: The table lists the top ten catastrophe bond transactions that were completed in 2015.
4. Catastrophe Bond Issuance and Capital Outstanding - 1998 to YE 2015: The chart below presents catastrophe bond issuance through 2015. Total bond issuance for the year 2015 was the fourth highest historically.
5. Alternative Capacity as a Percentage of Catastrophe Reinsurance Limit: The chart below presents alternative capital capacity as a percentage of global property catastrophe reinsurance limit from 2008 to year-end 2015.
Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities LLC, 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. (MMCSE L), 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 LLC, 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.