Guy Carpenter Comments on Catlin Cat Bond Placement

Guy Carpenter, the global risk and reinsurance specialist of the Marsh & McLennan Companies and its affiliate MMC Securities Ltd., noted their role as advisors in the completion of a multi-territory, multi-peril catastrophe bond transaction, for the Bermuda-based Catlin Group Limited.

Catlin announced its plans to “enter a catastrophe swap agreement that would provide it with coverage of up to $200.25 million in the event of a series of severe natural catastrophes,” last month (See IJ Website Oct. 2). The newly placed cat bond is designed to give Catlin protection against severe natural catastrophes, complementing the protection that it already purchases through the traditional reinsurance marketplace.

“The innovative bond, which is being brought to market by ABN AMRO London, will be the industry’s first publicly rated collateralized debt obligation of natural catastrophe risk,” said Guy Carpenter’s announcement. “The senior tranche of the transaction was ‘AA’ rated by Standard & Poor’s and is the first transaction linked to natural risk that has received this rating. In addition, it will be the first catastrophe bond to use Risk Management Solutions’ new parametric triggers for non-U.S. losses. The new bond will offer the diversification and yield benefits of natural catastrophe exposure to low-risk/low-volatility investors such as pension funds and life insurers.”

Geoff Bromley, Guy Carpenter’s Chairman of European and Asian operations, commented: “The innovative nature of this transaction underscores our ability to leverage our deep catastrophe reinsurance experience, market knowledge and new forms of non-traditional capacity to our clients’ advantage. This transaction brought together Guy Carpenter’s unparalleled knowledge of the catastrophe reinsurance market, our Instrat(R) unit’s superior quantitative capability and MMC Securities’ specialist capital market skills.”

Phillip Martin, Director of MMC Securities Limited, which acted as financial advisor, added: “We have a long-term commitment to the insurance linked capital markets, and we are committed to working closely with our clients to develop traditional and non-traditional forms of capacity.”

Perils covered by the transaction include US hurricanes (Florida, Gulf states and East Coast), Californian earthquakes, New Madrid (US Midwest) earthquakes, UK windstorms, European (excluding UK) windstorms, Japanese typhoons and Japanese earthquakes.