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Aon Benfield

Insurance-Linked Securities Alternative Markets Adapt to Competitive Landscape September 2015

Risk. Reinsurance. Human Resources.

Aon Securities Inc. and Aon Securities Limited (collectively, “Aon Securities”) provide insurance and reinsurance clients with a full suite of insurance-linked securities products, including catastrophe bonds, contingent capital, sidecars, collateralized reinsurance, industry loss warranties, and derivative products. As one of the most experienced investment banking firms in this market, Aon Securities offers expert underwriting and placement of new debt and equity issues, financial and strategic advisory services, as well as a leading secondary trading desk. Aon Securities’ integration with Aon Benfield’s reinsurance operation expands its capability to provide distinctive analytics, modeling, rating agency, and other consultative services. Aon Benfield Inc., Aon Securities Inc. and Aon Securities Limited are all wholly-owned subsidiaries of Aon plc. Securities advice, products and services described within this report are offered solely through Aon Securities Inc. and/or Aon Securities Limited.

Foreword It is my pleasure to bring to you the eighth edition of Aon Securities’ annual Insurance-Linked Securities report. The study aims to offer an authoritative review and analysis of the ILS asset class, and an overview of mergers and acquisitions activity, which represent two key areas of focus of our team. Along with our quarterly ILS Updates, the report is intended to be an important and useful reference document, both for ILS market participants and those with an active interest in the sector. Unless otherwise stated, its analyses cover the 12-month period ending June 30, 2015, during which time substantial progress was made in the ILS market and, as per the prior year, records were established. During the period under review, $7.0 billion of catastrophe bond issuance was secured—a decrease on the record-breaking prior year ($9.4 billion), yet the third highest annual issuance in the sector’s history. By June 30, 2015, catastrophe bonds on-risk had reached an all-time high, as of any June 30, of $23.5 billion, an impressive figure especially given that around $6 billion of bonds matured over the 12 months. During this period, sponsors continued to extend coverage on catastrophe bond transactions, bringing to market larger deal sizes, and offering investment opportunities in new territories and perils. The 2015 edition of this annual ILS report, Alternative Markets Adapt to Competitive Landscape, covers a wide range of topics in the ILS market, including: § § Aon Securities’ comprehensive review of the catastrophe bond market and its key drivers; § § A review of ILS investor activity; § § Our exclusive Aon ILS Indices; § § A summary of mergers and acquisitions (re)insurer activity; § § An overview of ILS-related markets, including trends in ILW, sidecars, actively managed vehicles, surplus notes, and subordinated debt; § § A review of North America, Europe, and Asia Pacific activity; § § A dedicated section on the Life and Health sector; and § § In-depth discussions with our ILS investor panel.

In all, the catastrophe bond market has seen over $67 billion of cumulative issuance since 1996, demonstrating its importance as a strategic and efficient risk management tool for insurers and reinsurers. Even amid an environment of reduced spreads and increased competition from traditional (re)insurers that characterized the period under review, ILS continues to strengthen its position within the (re)insurance industry. We hope you will find this document useful and informative, and if you have any questions relating to the data herein, or any queries regarding any aspect of the ILS sector, please contact me or my colleagues.

Paul Schultz, Chief Executive Officer, Aon Securities Inc.

Contents Aon Securities’ Annual Review of the Catastrophe Bond Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ILS Investor Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 The Aon ILS Indices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Mergers and Acquisitions (Re)insurer Activity . . . . . . . . . . . . . . . . . . . . . . 15 ILS-Related Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 North America Perils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Europe Perils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Asia Pacific Perils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Life and Health Perils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 A Market Discussion with ILS Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Appendix I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Catastrophe Bond Issuance Statistics

Appendix II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Property Catastrophe Bonds—Transaction Summary

Appendix III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Life and Health Catastrophe Bonds—Transaction Summary

Appendix IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Summary of Sidecar Issuance

Contact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Aon Securities’ Annual Review of the Catastrophe Bond Market Overview The 12-month period ending June 30, 2015 was again notable

Momentum from 2014, however, carried the total volume of

for the insurance linked-securities (ILS) market. The period

catastrophe bonds on-risk to a new all-time period high of

was characterized by enhanced coverage, an active mergers

$23.5 billion (Figure 2), representing a $1 billion year-on-year

and acquisitions environment and reactive traditional markets.

increase. Maturities for the year ending June 30, 2015 totaled

Annual catastrophe bond issuance totaled $7.0 billion

$5.9 billion, and Aon Securities remains bullish that market

(Figure 1) and was the third highest of any year in market

growth will continue to outpace redemptions.

history1. However, issuance was ultimately down 26 percent over the prior record 12-month period, in part due to the reaction of both traditional and collateralized reinsurance players to the heightened competition from the catastrophe bond market. The reduction in new catastrophe bond issuance compared to 2014 was offset by a sizeable increase in collateralized reinsurance participation.

Figure 1: Catastrophe bond issuance by year, 2006 to 2015 (years ending June 30)

Figure 2: Outstanding and cumulative catastrophe bond volume, 2006 to 2015 (years ending June 30)

Property issuance

Life and Health issuance

Property outstanding

Total cumulative bonds

Cumulative property issuance

Life and Health outstanding

70,000

10,000

67,083

9,400

60,000

8,145

60,102

6,431

6,981

6,665

USD millions

USD millions

8,000

5,914

6,000

4,736 4,382

4,000

50,702

50,000 44,037

40,000

37,605 33,223 28,487

30,000

26,782 22,422

3,279

20,000

2,000

1,705

13,174 13,167

12,911

23,467

17,788

16,155 12,723

10,000

15,123 11,504

6,558

0 15 20 14 20 13 20 12 20 11 20 10 20

09

08

20

07

20

20

06

15

14

20

13

20

20

12

11

20

10

20

20

09

08

20

07

20

06

20

20 Source: Aon Securities Inc.

20

0

1

20,867

Source: Aon Securities Inc.

Figures exclude private securitization

Aon Benfield

1

Key market drivers Enhanced coverage

Interestingly, these same public entities have also turned to

Sponsors continued to expand coverage on catastrophe

private reinsurance capacity. Florida Citizens, a consistent

bond transactions. This took the form of more aggregate and

purchaser of reinsurance since 2011 is the largest beneficiary

variable reset transactions, longer terms, larger transaction

of catastrophe bonds through its Everglades Re Ltd. and

sizes and new covered areas and perils, as discussed

Everglades Re II Ltd. programs based on outstanding notional

throughout this report.

volume, as of June 30, 2015. It is also notable that the FHCF

Supply and demand The prevailing low yield environment motivated investors to continue seeking returns in the ILS market, due to its

elected to secure its first private market purchase of reinsurance coverage, including collateralized reinsurance, for the 2015 hurricane season since the inception of the FHCF in 1994.

low correlation with the dynamics of the global economy.

Below average catastrophe losses3

In the 12 months ending June 30, 2015, there were moderate

Global natural disasters in the calendar year 2014 combined to

capital inflows in aggregate across the ILS sector from

cause economic losses of $132 billion—37 percent below the ten-

both existing and new investors. Growth in assets under

year average of $211 billion. In the same period, insured losses

management (AUM) from some of the larger ILS managers,

reached $39 billion—38 percent below the ten-year average of

such as Stone Ridge Asset Management, LLC and Elementum

$63 billion and the lowest insured loss total since 2009. This trend

Advisors, LLC, was softened by reductions in AUM from

continued through the first half of 2015. The year 2014 was the

other investors, such as Nephila Capital Ltd., Aeolus Capital

second consecutive calendar year with below average losses,

Management, Ltd., and Fermat Capital Management, LLC.

following 2013 losses that were 22 percent below the trailing

Overall, alternative capital increased modestly in Q2 2015 at

ten-year average.

$68.4 billion2 deployed across all alternative market products.

Active mergers and acquisitions environment

The pause in rate decreases for some alternative markets allowed

Given the organic pressure facing the P&C (re)insurance industry,

traditional reinsurers to recapture some business. In the soft

a number of companies turned to M&A to address their strategic

market environment, characterized by record levels of industry

goals. Diversification, scale, and increased effectiveness of

capital, insurers’ and traditional reinsurers’ operating results

capital utilization has been an important factor in recent M&A

have been under pressure. This has motivated some reinsurers to

transactions. With a number of (re)insurers focused on M&A,

consider further decreases in rates, while others have maintained

some concluded it was untimely to dedicate resources to new

discipline in terms of price and/or coverage expansion.

catastrophe bond issuances. Recent well-publicized mergers and

Privatization of risk in peak catastrophe-exposed regions

acquisitions in the reinsurance industry are listed on page 15— “Mergers and Acquisitions (Re)insurer Activity.”

Overall reinsurance demand in peak regions increased materially for the second consecutive year. This was particularly notable in Florida and other U.S. coastal areas, given the attractive risk transfer margins offered in both the alternative and traditional markets. As a result, a number of insurers reduced participation in government risk transfer programs—such as the Florida Hurricane Catastrophe Fund (FHCF)—and utilized reinsurance capacity to depopulate policies from Citizens Property Insurance Corporation (Florida Citizens)—a government entity that provides insurance protection to Florida policyholders who are entitled to, but are unable to find property insurance coverage in the private market.

2 3

2

Source: Aon Securities Inc. Aon Benfield Impact Forecasting, “Global Catastrophe Recap: First Half of 2015”, dated July 2015 and “2014 Annual Global Climate and Catastrophe Report”, dated January 2015

Insurance-Linked Securities

Transaction review Twenty-five transactions (including one with life and one with

resulting in their increased confidence to accept indemnity risks.

health exposures) closed during the 12-month period ending

Additionally, the soft market has also allowed other sponsors

June 30, 2015. This represented a decrease of 29 percent from

to push the market in terms of indemnity coverage. With the

the prior year, in which 35 issuances closed. However, average

increasing prevalence of indemnity triggers, Aon Securities has

transaction size increased to $279 million—a new record for any

witnessed a growing sponsor comfort with catastrophe bond

12-month period ending June 30.

subject business and expert risk analysis report disclosures and, in

U.S. exposures continued to dominate the catastrophe bond market, with 22 of the 25 transactions comprising U.S. risk in

turn, investor sophistication to interpret more robust information under an underwriter’s lens.

some capacity. From a modeled view (allocating total annual

Competitive market conditions for insurance risks also

limit by contribution to expected loss across covered regions),

manifested in the coverage period lengths sponsors secured

North American perils represented a substantial 84 percent

for transactions. The weighted average property catastrophe

of the total property issuance—a trend that is somewhat

bond risk period in a given issuance year climbed to 3.4 years

unsurprising given that the U.S. is the world’s largest property

in 2015 from 3.3 in 2014, 3.2 in 2013, and 3.0 in 2012. Looking

casualty insurance market, with an approximate 40 percent

specifically at transactions over four years, this shift is even

share of global P&C written premium . Outside of the U.S.,

more apparent as 19 percent of property catastrophe bond

dedicated Japan risk was covered in two transactions, and

limit placed in the 12-month period under review was issued

stand-alone Europe risk in one transaction. As other regions

with a scheduled redemption date more than four years away.

continue to develop economically and insurance penetration

This figure was only 5 percent for the same period in 2014.

increases, the alternative market is well-positioned to provide

Although longer tenured bonds are not novel developments in

catastrophe coverage and further its diversification. Indeed,

our market, they have re-emerged in the property catastrophe

in July 2015 the first catastrophe bond to benefit a China (re)

sector since the financial crisis. Structural innovations such as

insurer was issued, Panda Re Ltd. Series 2015-1, on behalf of

variable resets, which grant further flexibility over a bond’s

China Property and Casualty Reinsurance Company.

layer, provide more comfort to sponsors seeking a longer term;

4

Hurricane risk continues to be the main risk ceded to the alternative market, with the contribution to expected loss from North America hurricane for new property catastrophe

additionally, the ability to lock-in multi-year known pricing in a historically favorable rate environment may also be a factor in the increase in weighted average term issuance.

issuances at 52 percent for the year ending June 30, 2015.

In all, 23 different sponsors utilized catastrophe bonds in

However, this figure is less than the 60 percent observed in

the annual period under review, two of which, American

the prior year period due to a doubling in North America

International Group, Inc. and United Services Automobile

earthquake coverage, which represented 30 percent of the

Association, did so across multiple transactions. Of note,

issuance for the period, based on contribution to expected

issuance from government pools and trusts increased on a

loss. Japan’s ILS share was flat at 10 percent relative to last year,

notional basis to 32 percent of the total property catastrophe

while Europe’s share decreased from 13 to 5 percent. North

issuance for the 12 months ending June 30, 2015—up from 21

America other perils, which includes severe thunderstorm,

percent last year. This growth is particularly impressive given

winter storm, and wildfire, accounted for two percent of total

the $1.5 billion Florida Citizens transaction that closed in 2014

issuance, while the rest of the world totaled one percent.

and its relatively smaller 2015 transaction of $300 million.

In terms of recovery mechanisms, 70 percent of annual property catastrophe bond deals utilized indemnity triggers. On a notional limit basis this trend has steadily progressed from less than 50 percent of annual issuance in 2012, to 72 percent today— an impressive increase over a short period of time. Aon Securities views this trend as the result of investors’ deepening relationships with those sponsors that have come to market year-after-year, 4

Other government-affiliated sponsors, such as the California Earthquake Authority and the Texas Windstorm Insurance Association, have also found value in alternative capital as evidenced by their return to the market to utilize greater capacity. As a result, in the period under review annual issuance from governmental sponsors surpassed the $2 billion threshold for the first time in market history and remains a key source of growth for the market going forward.

Aon Benfield, Insurance Risk Study “Growth, profitability and opportunity”, ninth edition 2014, dated September 2014

Aon Benfield

3

Third quarter 2014 Coinciding with the middle of the Atlantic hurricane season

Golden State Re II Ltd. Series 2014-1 (Golden State Re II)

and falling between major reinsurance renewals dates, the

replaced the maturing Golden State Re Ltd. Series 2011-1

third quarter typically sees the least catastrophe bond issuance

transaction for the State Compensation Insurance Fund (SCIF).

volume over a year.

Golden State Re II provides SCIF coverage with an increased

In line with this trend, a single transaction closed during the historically quiet third quarter of 2014.

limit of $250 million and term of 4.3 years ($50 million and 1.2 years more than before). The bond’s trigger is again based on modeled losses to a notional insurance portfolio of workers’ compensation risks from the peril of earthquake. Although the covered area is nationwide, the contribution to expected loss from outside California is less than 0.01 percent. Pricing for the new issuance settled 40 percent below the prior transaction at 2.20 percent, demonstrating significant compression from the 2011 issuance.

Table 1: Third quarter 2014 catastrophe bond issuance Beneficiary

Issuer

State Compensation Insurance Fund

Golden State Re II Ltd.

Total Source: Aon Securities Inc.

4


Series

Class

Series 2014-1

Class A

Size (millions)

Covered perils

Trigger

Collateral

$250

U.S. EQ

Modeled loss

MMF

$250 Legend U.S. — United States EQ — Earthquake

Fourth quarter 2014 The California Earthquake Authority (CEA) return to the

Six transactions closed during the fourth quarter of 2014, totaling $2.1 billion—the largest property issuance of any fourth

catastrophe bond market via a new notes program, Ursa

quarter to date. All sponsors were returners to the catastrophe

Re Ltd. The latest transaction for the CEA is its largest by

bond market, three for the second time that calendar year.

$100 million and provides California earthquake indemnity coverage on an annual aggregate basis. Further evidence

A selection of transactions issued in the fourth quarter of

of rate compression is seen in comparison between past

2014 includes:

Embarcadero Reinsurance Ltd. (Embarcadero Re) transactions and the latest Ursa Re Ltd. issuances. Specifically, the multiple

Everest Reinsurance Company’s (Everest Re) Kilimanjaro

of expected loss (interest spread over expected loss) dropped

Re Limited Series 2014-2 Class C, which was the sponsor’s

from 3.3x in Embarcadero Re Series 2012-I Class A to 2.0x

second time in the market during calendar year 2014. The

in Ursa Re Ltd. Series 2014-1 Class B—both tranches having

notes provide Everest Re with $500 million of earthquake

similar levels of expected loss; and

coverage in the U.S. and Canada, representing the largest transaction with a term of five years, to exclusively cover

Nakama Re Ltd.’s Series 2014-2 issuance, which provides

earthquakes, and equal to the largest transaction for a reinsurer since the inception of the catastrophe bond market;

National Mutual Insurance Federation of Agricultural Cooperatives (Zenkyoren) $375 million in coverage split between a four-year per occurrence and five-year with floating three-year term aggregate structure. The Class 2 notes are the market’s first Japan term aggregate tranche and the first five-year tranche for Zenkyoren.

Table 2: Fourth quarter 2014 catastrophe bond issuance Beneficiary

Issuer

Everest Reinsurance Company

Kilimanjaro Re Limited

California Earthquake Authority

Ursa Re Ltd.

Series

Class

Size (millions)

Covered perils

Trigger

Collateral

Series 2014-2

Class C

$500

NA EQ

Industry index

MMF

Class A

$200 CAL EQ

Indemnity

MMF

Class B

$200

Series 2014-1

United Services Automobile Association

Residential Reinsurance 2014 Limited

Series 2014-II

Class 4

$100

U.S. HU, EQ, ST, WS, WF, VE, MI

Indemnity

MMF

Amlin AG

Tramline Re II Ltd.

Series 2014-1

Class A

$200

U.S. HU, EQ & EU Wind

Industry index

MMF

Class 1-B

$100

Class 3-A

$100

Indemnity

MMF

Class 3-B

$300

NA/MEX/CB/ Gulf HU & NA/ MEX/CB EQ

JP EQ

Indemnity

MMF

American International Group, Inc.

National Mutual Insurance Federation of Agricultural Cooperatives Total Source: Aon Securities Inc.

Tradewynd Re Ltd.

Nakama Re Ltd.

Series 2014-1

Class 1

$175

Class 2

$200

Series 2014-2 $2,075

Legend CAL — California CB — Caribbean EU — Europe JP — Japan MEX — Mexico NA — North America U.S. — United States

EQ — Earthquake HU — Hurricane MI — Meteorite Impact ST — Severe Thunderstorm VE — Volcanic Eruption WF — Wildfire WS — Winter Storm

Aon Benfield

5

First quarter 2015 Catastrophe bond issuance for the calendar year 2015 began

level than the 2014 issuance. With an expected loss of 0.018

with an active first quarter. Eight transactions resulted in a

percent, the notes are rated “BBB-” by S&P, and for the first

combined $1.7 billion of coverage—the most of any first quarter

time for the insurer are denominated in Japanese yen. This is

in the market’s history. Additionally, $3.9 billion of bonds came

the largest Japanese yen transaction for the catastrophe bond

off-risk during the period, which is also a record for the most

market to date;

maturities in any quarter.

New sponsor, Safe Point Insurance Company, entering the

A selection of transactions issued in the first quarter of

market in March with the first Florida-only hurricane bond of

2015 includes:

2015—a region which represented approximately a third of the total issuance of calendar year 2014 on a contribution to

Atlas IX Capital Limited, which provides SCOR P&C SE

expected loss basis. The transaction, Manatee Re Ltd. Series

(SCOR) with $150 million in industry index coverage for

2015-1 provides $100 million in coverage on an indemnity

U.S. hurricane and North America earthquake coverage,

basis; and

with Canada earthquake risk being a new addition. The

State Farm Fire and Casualty Company (State Farm) raising

annual aggregate transaction utilizes European Bank of Reconstruction Development Medium term notes as

$300 million of New Madrid earthquake indemnity coverage

collateral. The transaction closed at the low end of

for the third consecutive year. This brings State Farm’s New

marketed spread guidance;

Madrid coverage to a total of $900 million. The latest issuance from State Farm includes an innovative extension event,

Tokio Marine & Nichido Fire Insurance Co., Ltd. (Tokio Marine) again issuing under its Kizuna Re II Ltd. program in the first quarter. The transaction provides ¥35.0 billion ($294 million) in Japan earthquake coverage at a more remote

which allows a reduced extension interest spread of ten basis points if the loss estimate is within the reinsured layer or a loss payment has been made. This feature subsequently appeared in a number of transactions in the second quarter.

Table 3: First quarter 2015 catastrophe bond issuance Beneficiary Aetna Life Insurance Company

Issuer Vitality Re VI Limited

Class

Size (millions)

Class A

$140

Class B

$60

Series 2015-1

Covered perils

Trigger

Collateral

U.S. Medical Benefits Ratio

Indemnity

MMF

Catlin Insurance Company Ltd.

Galileo Re Ltd.

Series 2015-1

Class A

$300

U.S. HU, NA EQ, EU Wind

Industry index

MMF

SCOR Global P&C SE

Atlas IX Capital Limited

Series 2015-1

Class A

$150

U.S. HU, NA EQ

Industry index

EBRD

Chubb Group of Insurance Companies

East Lane Re VI Ltd.

Series 2015-1

Class A

$250

Northeast HU, EQ, ST, WS, WF, VE, MI

Indemnity

MMF

Tokio Marine & Nichido Fire Insurance Co., Ltd.

Kizuna Re II Ltd.

Series 2015-1

Class A

¥35,000 ($294)*

JP EQ

Indemnity

MMF

Safepoint Insurance Company

Manatee Re Ltd.

Series 2015-1

Class A

$100

FL HU

Indemnity

MMF

$100

U.S. HU, AUS CY

Industry index; modeled loss

MMF

$300

New Madrid EQ

Indemnity

MMF

Münchener RückversicherungsGesellschaft Aktiengesellschaft

Queen Street X Re Limited

State Farm Fire and Casualty Company

Merna Re Ltd.

Total Source: Aon Securities Inc. *converted at 1¥ = $0.0084 as of March 26, 2015

6

Series


Series 2015-1

Class A

$1,694 Legend AUS — Australia EU — Europe FL — Florida JP — Japan NA — North America U.S. — United States

CY — Cyclone EQ — Earthquake HU — Hurricane MI — Meteorite Impact ST — Severe Thunderstorm VE — Volcanic Eruption WF — Wildfire WS — Winter Storm

Second quarter 2015 The second quarter of 2015 saw $3.0 billion of catastrophe

AXA’s France, Japan, and U.S. extreme mortality transaction

bond issuance through ten transactions and the entrance of

Benu Capital Limited, which provides €285 million ($310

first-time sponsor UnipolSai Assicurazioni S.p.A. Additionally, in

million) in coverage. This is AXA’s first extreme mortality

the second quarter life and health issuance for the first half of

catastrophe bond since 2006 and its fifth issuance overall.

the calendar year reached the highest level since 2007 with the

The trigger is mortality index-weighted by age and gender

issuance of AXA Global Life’s (AXA) extreme mortality bond.

over a five-year term; and The Texas Windstorm Insurance Association (TWIA) again

A selection of transactions issued in the second quarter of

returned to the catastrophe bond market with Alamo Re Ltd.

2015 includes: Heritage Property & Casualty Insurance Company’s (Heritage) third transaction under its Citrus Re Ltd. program, which again covers Florida hurricane risk on an indemnity basis. This time, however, newly introduced Class B and C notes are positioned relatively lower in the reinsurance tower to replace part of Heritage’s FHCF reinsurance cover. Overall, Heritage was able to reduce its reliance on the FHCF and secure competitive

The indemnity-triggered annual aggregate Texas hurricane transaction significantly increased in capacity compared to the prior year’s transaction, closing at $700 million in coverage across two classes and represents a 75 percent increase in limit from 2014. TWIA receives coverage via a reinsurance agreement with Hannover Rück SE, which in turn has a retrocession agreement with Alamo Re Ltd.

coverage through use of the alternative markets;

Table 4: Second quarter 2015 catastrophe bond issuance Beneficiary

Issuer

Heritage Property & Casualty Insurance Company

Citrus Re Ltd.

Louisiana Citizens Property Insurance Corporation

Pelican III Re Ltd.

AXA Global Life

Benu Capital Limited

Series

Series 2015-1

Series 2015-1

Class

Size (millions)

Class A

$150

Class B

$98

Class C

$30

Class A

$100

Class A

€135 ($147)*

Class B

€150 ($163)*

Covered perils

Trigger

Collateral

FL HU

Indemnity

MMF

LA HU

Indemnity

MMF

FR/JP/U.S. Mortality

Parametric index

EBRD

Massachusetts Property Insurance Underwriting Association

Cranberry Re Ltd.

Series 2015-1

Class A

$300

MA HU, ST, WS

Indemnity

MMF

Citizens Property Insurance Corporation

Everglades Re II Ltd.

Series 2015-1

Class A

$300

FL HU

Indemnity

MMF

Class A

$300 TX HU

Indemnity

MMF

Class B

$400

Class A

$300

Northeast HU, EQ, ST, WS

Indemnity

MMF

Class 10

$50

Indemnity

MMF

Class 11

$100


Class 1

$300

U.S. HU

Parametric index

MMF

Class A

€200 ($225)**

EU EQ

Indemnity

EBRD

Texas Windstorm Insurance Association

Alamo Re Ltd.

The Travelers Indemnity Company

Long Point Re III Ltd.




Compass Re II Ltd.

UnipolSai Assicurazioni S.p.A

Azzurro Re I Limited

Total Source: Aon Securities Inc. *converted at €1 = $1.0873 as of April 24, 2015 **converted at €1 = $1.1244 as of June 17, 2015

Series 2015-1

Series 2015-1

Series 2015-I Series 2015-1

$2,962 Legend EU — Europe FL — Florida FR — France JP — Japan LA — Louisiana MA — Massachusetts TX — Texas U.S. — United States

EQ — Earthquake HU — Hurricane ST — Severe Thunderstorm VE — Volcanic Eruption MI — Meteorite Impact WF — Wildfire WS — Winter Storm

Aon Benfield

7

Outlook The traditional market responded to the recent progress of the

The lines drawn between traditional and alternative markets

alternative market by providing competitive pricing and multi-

have continued to blur as coverage converges. The efficiencies

year expanded coverage. As a result, some key catastrophe bond

of the capital markets to price risk have emerged as a driver of

sponsors elected to turn to the traditional and/or collateralized

the overall market. Sponsors have been the beneficiaries and we

markets. On the investor side, we see continued growth in

expect they will continue to benefit from this competition, while

allocations to collateralized reinsurance, driven by higher returns

investors are finding more ways to participate and develop long-

and access to broader risks. These trends are a strong sign of the

term relationships.

role for alternative capital within the broader risk transfer market.

Despite catastrophe bond issuance for the first half of 2015 trailing the record first half of 2014, the market made positive steps forward and is expected to end the calendar year 2015 with $6 to $7 billion in issuance. Current pricing trends are expected to continue in 2016 in the absence of substantial catastrophic events that disrupt the supply of capital.

Figure 3: Catastrophe bond issuance by half-year 2008 – 2015 January - June

9,000

July - December

8,000

2,325

7,000

6,000

USD millions

3,498 5,000

2,692

4,000

2,625 2,843

3,000

320 2,000

1,000

5,902

2,086 3,588

4,656

3,973

2,650

2,510

1,757

1,385

0 2008 Source: Aon Securities Inc.

8


2009

2010

2011

2012

2013

2014

2015

ILS Investor Activity Capacity providers5 Figure 4: Investor by category (years ending June 30) Catastrophe Fund

Institutional

Mutual Fund

Reinsurer

Hedge Fund

The source of capacity for ILS transactions was fairly stable year-on-year. Dedicated catastrophe funds remained the largest providers of capacity

2%

and increased their market share slightly to 6%

10%

5%

47 percent in the year ending June 30, 2015. The market share for institutional investors was also stable for the period. As expected, hedge fund

11%

9%

investors’ share decreased due to lower returns 46%

47%

expectations. Reinsurers slightly increased their share of the catastrophe bond market to 10 percent compared to 6 percent in the prior year

32%

period. Mutual funds decreased their market

32%

share, with some focused on setting-up, or growing interval fund structures, which allow mutual funds to invest in less-liquid transactions 2014

2015

such as industry loss warranties (ILW), collateralized reinsurance, and sidecars.


Capital origins6 Figure 5: Investor by country/region (years ending June 30) U.S.

UK

Bermuda

Switzerland

Other

The geographic mix of catastrophe bond investors in 2015 varied significantly from 2014. The U.S. continued to be the main source of

11%

13%

capital; however, its overall share decreased considerably from 47 percent to 34 percent yearon-year as a result of the reduced participation

34%

from hedge funds and mutual funds. Bermuda 26%

47%

28%

increased its participation in the 12 months under review, which is in line with the increase in participation from reinsurers and new

11% 14% 2015

catastrophe bond mandates from dedicated 7% 9% 2014

catastrophe funds domiciled on the island. Other regions with increased market share in 2015 included the UK and Germany, while participation from Asia decreased.


5

Aon Securities’ analysis of investor category includes only those transactions in which the firm participated

6

Aon Securities’ analysis of geographic attributes includes only those transactions in which the firm participated

Aon Benfield

9

General market trends Third quarter 2014

reduction to the MultiCat Mexico Limited Series 2012-I

On June 30, 2014 the Financial Industry Regulatory Authority

Class C notes. There was a lot of discussion around trading

(FINRA) began publicly disseminating trading activity of

the notes, with many investors reflecting on bids and offers.

Rule 144A transactions, of which most catastrophe bonds

Ultimately, however, trading was limited as the bid/ask spread

are a subset. Although secondary market catastrophe bond

remained fairly wide. The market learned in the fourth quarter

traders working for U.S. broker dealers had been required to

that the notes would not suffer any loss of principal when

report trades for many years, this information had previously

the National Hurricane Center’s Best Track data showed the

never been disseminated to market participants. According to

storm did not cross the covered area boundary at the required

FINRA, Rule 144A transactions comprised nearly 20 percent

barometric threshold to trigger the bond. As a result, pricing

of the average daily volume in the corporate debt market as

quickly recovered.

a whole. Steven Joachim, FINRA’s Executive Vice President, Transparency Services commented: “We’re excited to increase transparency in this opaque market. The information will help professional investors and contribute to more efficient pricing of these securities, as well as inform valuation for mark-to-market purposes.”7 Although the new rule covers only U.S. broker dealers and issuances with CUSIPs, and trade volume disclosures are capped at $1 million for high yield securities or $5 million for investment grade securities, this is no doubt a step in the right

Demand from investors for new issuance in the catastrophe bond market remained strong as 2014 came to a close. Investors secured $2.3 billion in the second half of 2014 via the primary market. With a record amount of bonds outstanding in the catastrophe bond market and $5.47 billion maturing in the first half of 2015, investors sought to make room for new deals in their portfolios by selling short-dated positions in

direction for the market in terms of transparency.

the secondary market. The active secondary market enabled

In contrast to the third quarter of 2013—the most active issuance

support in the primary market.

for a third quarter on record—the third quarter of 2014 was relatively quiet. One catastrophe bond, Golden State Re II, closed in the quarter. Given the lack of primary issuances, most investors employed a “buy and hold” strategy, reflected by the low trading volumes in the secondary market. Buyers far outnumbered sellers in the period and Aon Securities’ trading desk received relatively strong bids for most bonds on risk. However, investors as a whole were not inclined to sell given the general lack of opportunity to replace bonds in the portfolio with new issues. During the third quarter of 2014, Aon Securities estimates $1.0 to $1.4 billion of catastrophe bonds were traded. The quarter saw a healthy level of interest from new investors entering the ILS market on a direct basis. One new Japanese investor opened a trading account with Aon Securities and participated in its first catastrophe bond trade during the quarter. Additionally, five new investors worked to establish

investors to access more product and ultimately increased

After the U.S. hurricane season came to a close, most trading throughout the quarter involved hurricane transactions with less than six months until maturity. Specifically, institutional investors sought to purchase these securities to achieve yields higher than would be realized by holding cash or cash-like instruments. Sellers used the liquidity provided to invest via the new issue market and extend portfolio duration. The liquidity witnessed for short-dated transactions in the quarter did not translate across the entire secondary market. Trading of longer-dated and low yielding transactions was somewhat tepid. This reflected the lack of higher-yielding primary issuance that closed over the prior 24 months. Investors were able to source remote risks in the primary market, and as a result had less demand to purchase similar risks in the secondary market. As a result, investors looking to rebalance portfolios

a trading relationship with Aon Securities.

away from remote risks had difficulty finding attractive bids. The

Hurricane Odile struck the Baja California Peninsula in

allowed sponsors to upsize primary issuances, such as Amlin

September. The storm became the strongest tropical cyclone to

AG upsizing its Tramline Re II Ltd. Series 2014-1 issuance below

make landfall on the peninsula since 1967’s Hurricane Olivia. The

initial interest guidance.

market speculated the event could cause a 50 percent principal

7

10

Fourth quarter 2014

FINRA press release dated June 30, 2014


lack of supply for higher-yielding deals in the secondary market

Strong demand from investors resulted in many sponsors

First quarter 2015

increasing the size of primary issuances from marketed

Given recent high volumes of transactions with low coupons,

guidance. Despite no new sponsors accessing the market during

investors were pleased to see two bonds with relatively high

the fourth quarter, a number of returning sponsors brought

coupons kick-start the year’s issuance. As a result of investor

perils and terms not seen in their previous transactions. For

demand for high yielding deals, both Galileo Re Ltd. Series 2015-1

instance, Everest Re’s North America earthquake transaction,

A and Atlas IX Capital Limited closed at the low end of guidance.

Kilimanjaro Re Limited Series 2014-2 Class C, followed the successful placement of its Southeast named storm transaction

Secondary markets continued to be active in the first quarter of

and North America multi-peril transaction earlier in 2014. As

2015 as investors had excess capital to deploy from $3.9 billion

another example, Zenkyoren utilized a rolling term aggregate

of catastrophe bond maturities throughout the quarter. Similar

structure to cover Japan earthquake exposures. Sponsors

to Q3, short-dated bonds were especially active as investors

maximized capacity by pursuing different coverages from their

sought to reallocate capital to primary issuances. A marked

previous transactions.

decrease in demand for low yielding bonds was evident as spreads for bonds with attachment probabilities less than 1.5

During the quarter, investors became concerned about a

percent widened by an average of 20 basis points in the quarter.

potential loss on American Strategic Insurance Group’s Gator

Demand for Florida risks also decreased as a number of primary

Re Ltd. Series 2014-1 transaction. Estimated losses began

issuances were marketed later in the quarter with the stand-

to approach the attachment level during the quarter. On

alone risk. Europe windstorm transactions saw strong demand,

December 19, $20 million in aggregate, (10 percent of the

due to a relatively limited supply of the risk in the market.

limit), traded at a price level of 80.00. By the end of the quarter, however, the price began to rebound following the risk period

In late March, AQR Capital Management announced it

reset at year-end.

was closing the doors on its reinsurance platform, AQR Re Management, due to concerns over the ability to deliver the

Several ILS investors were active in launching new vehicles.

desired returns while participating in quality business. AQR

Pioneer Investments launched its Pioneer ILS Interval Fund,

Re’s website stated that “While the diversification benefits and

allowing them to participate in more illiquid reinsurance

relative returns of reinsurance as an asset class remain attractive,

investments such as collateralized reinsurance and sidecars,

we have come to the conclusion that consolidating market

in addition to catastrophe bonds. Interval funds have become

dynamics will make it increasingly difficult to put larger amounts

increasingly popular vehicles for mutual funds investing in

of capital to work and achieve attractive risk-adjusted returns

alternative assets. These funds offer redemptions only at specific

for our investors”. AQR Re ceased writing new and renewal

time frames (usually quarterly). Stone Ridge Asset Management

business after April 1, 2015.

was the first ILS manager to set up this type of investment vehicle. In contrast to Pioneer Investment’s launch targeting illiquid investments, AlphaCat Managers Ltd. launched its BetaCat Fund Ltd.—a low-cost, passive fund strategy which invests in all new property catastrophe bond issuances. Credit Suisse Asset Management became the first ILS asset manager with a rated vehicle, with the launch of Kelvin Re Limited (Guernsey). The $600 million carrier, which has a financial strength rating of “A-” by A.M. Best, is funded by the Abu Dhabi Investment Council. The carrier is targeting a lower expense ratio compared to the industry in order to manage profitability. Setting up a rated vehicle seems to be a natural evolution for ILS investors seeking lines on traditional reinsurance programs. A rated carrier provides flexibility for an asset manager to offer both

Second quarter 2015 In the primary market, investors sourced a variety of U.S. regional risks and other diversifiers. Investors welcomed these deals into portfolios, and the majority of transactions upsized during the quarter. Regional catastrophe bonds enabled investors to construct a diversified portfolio with more granular risk profiles than investing in broadly exposed bonds. With the primary issuance cycle focused in regional transactions during the quarter, investors utilized the secondary market to rebalance portfolios. U.S. multi-peril bonds were offered by funds looking to redeploy their capital into new primary catastrophe bond issuances and collateralized reinsurance transactions. U.S. multiperil bonds’ seasonally-adjusted spreads widened by 25 basis points as a result of selling pressure during the quarter.

collateralized and rated options to cedants. This in turn provides the manager with the ability to source broader risk opportunities. Aon Benfield

11

Florida-exposed transactions were under pressure in the

Outlook

secondary market early in the quarter as investors anticipated

Secondary bid spreads closed slightly up for the period under

primary Florida-based transactions Everglades Re Ltd. Series

review, driven primarily by increases in spreads for low yielding

2014-1, in particular, traded an estimated $250 million in the

transactions. Of note, 70 percent of the primary market volume

month as investors looked to diversify their holdings away

for this 12-month period was issued with an interest spread of 5

from this widely held bond (which at quarter-end represented

percent or below. Aon Securities believes pricing for remote risks

6 percent of the catastrophe bond market). However, after

has stabilized. However, investors are signaling that they would

the initial interest spread guidance of the Everglades Re II Ltd.

like to see more risk in the market. Investors increasingly value the

Series 2015-1 bond failed to attract investor interest, the 2014

ability to enhance portfolio yield and construct more granular risk

transaction showed an increase in demand driving its yield lower.

profiles. Further, we expect demand for regional risks to continue,

Trading in the 2014 issuance represented approximately

following the large volume of wind pools accessing the market

10 percent of trading volume in the secondary market—estimated

during the first half of 2015.

between $2.4 billion and $2.6 billion during the quarter. Institutional capital continues to enter the market particularly via Aon Securities continued to see a general selling of remote

managed sidecar funds and hedge fund reinsurance strategies.

risk transactions as investors sought to boost portfolio

While some ILS funds that focus on collateralized reinsurance

returns. Investors with lower return hurdles and/or well-

and catastrophe bonds have returned capital to investors,

diversified portfolios were large buyers of these lower yielding

other funds advisors continue to attract assets signaling that

transactions. In the quarter, there were strong bids for life-

institutional investors find value in the low correlated returns that

related transactions, with $70 million of mortality bonds

ILS strategies provide.

ultimately trading. After the issuance of Benu Capital Limited, demand reduced slightly.

Traditional reinsurance markets reported moderately decreasing rates that seem to be stabilizing at the U.S. wind renewal season in June/July 2015. Catastrophe bond issuance volumes may be impacted if there is a decoupling of rates between the competing markets.

12


The Aon ILS Indices The Aon ILS Indices are calculated by Bloomberg using month-end price data provided by Aon Securities Inc. During the 12-month period under review, the Aon ILS Indices

The annual returns for all Aon ILS Indices underperformed the

posted positive results. The All Bond and BB-rated Bond

prior one year returns as keeping pace with the historic average

Indices were positive for the year with gains of 2.80 percent

annual returns remains challenging given the current market

and 1.29 percent, respectively. The U.S. Hurricane and U.S.

environment. However, the 10-year average annual return of

Earthquake posted positive results for the year of 5.61 percent

the Aon All Bond ILS Index was 8.23 percent—again producing

and 2.60 percent. The Aon All Bond Index outperformed

superior returns relative to the other benchmarks. This

relative to comparable fixed income benchmarks. However,

demonstrates the value a diversified book of pure insurance

the Aon ILS Indices underperformed the S&P 500 index

risks can bring long term to investors’ portfolios.

during the past year.

Table 5: Aon ILS Indices8 Index title Aon ILS Indices

Return for annual period ended June 30

5 yr average annual return

10 yr average annual return

2015

2014

2010-2015

2005-2015

All Bond Bloomberg Ticker (AONCILS)

2.80%

8.27%

7.57%

8.23%

BB-rated Bond Bloomberg Ticker (AONCBB)

1.29%

5.79%

5.57%

6.54%

US Hurricane Bond Bloomberg Ticker (AONCUSHU)

5.61%

8.74%

8.95%

9.73%

US Earthquake Bond Bloomberg Ticker (AONCUSEQ)

2.60%

4.28%

5.13%

6.33%

3-5 Year U.S. Treasury Notes Index

2.05%

1.75%

2.25%

3.98%

3-5 Year BB Cash Pay U.S. High Yield Index

2.18%

10.11%

7.70%

7.15%

S&P 500

5.25%

22.04%

14.88%

5.64%

ABS 3-5 Year, Fixed Rate Index

2.36%

3.91%

4.00%

3.57%

CMBS 3-5 Year, Fixed Rate Index

2.21%

4.26%

5.66%

6.44%

Benchmarks

8

The 3-5 Year U.S. Treasury Note Index is calculated by Bloomberg and simulates the performance of U.S. Treasury notes with maturities ranging from three to five years. The 3-5 Year BB Cash Pay U.S. High Yield Index is calculated by Bank of America Merrill Lynch (BAML) and tracks the performance of U.S. dollar denominated corporate bonds with a remaining term to final maturity ranging from three to five years and are rated BB1 through BB3. Qualifying securities must have a rating of BB1 through BB3, a remaining term to final maturity ranging from three to five years, fixed coupon schedule and a minimum amount outstanding of $100 million. Fixed-to-floating rate securities are included provided they are callable within the fixed rate period and are at least one year from the last call prior to the date the bond transactions from a fixed to a floating rate security. The S&P 500 is Standard & Poor’s broad-based equity index representing the performance of a broad sample of 500 leading companies in leading industries. The S&P 500 Index represents price performance only, and does not include dividend reinvestments or advisory and trading costs. The ABS 3-5 Year, Fixed Rate Index is calculated by BAML and tracks the performance of U.S. dollar denominated investment grade fixed rate asset backed securities publicly issued in the U.S. domestic market with terms ranging from three to five years. Qualifying securities must have an investment grade rating, a fixed rate coupon, at least one year remaining term to final stated maturity, a fixed coupon schedule and an original deal size for the collateral group of at least $250 million. The CMBS 3-5 Year, Fixed Rate Index is calculated by BAML and tracks the performance of U.S. dollar denominated investment grade fixed rate commercial mortgage backed securities publicly issued in the U.S. domestic market with terms ranging from three to five years. Qualifying securities must have an investment grade rating, at least one year remaining term to final maturity, a fixed coupon schedule and an original deal size for the collateral group of at least $250 million. The performance of an index will vary based on the characteristics of, and risks inherent in, each of the various securities that comprise the index. As such, the relative performance of an index is likely to vary, often substantially, over time. Investors cannot invest directly in indices. While the information in this document has been compiled from sources believed to be reliable, Aon Securities has made no attempts to verify the information or sources. This information is made available “as is” and Aon Securities makes no representation or warranty as to the accuracy, completeness, timeliness or sufficiency of such information, and as such the information should not be relied upon in making any business, investment or other decisions. Aon Securities undertakes no obligation to update or revise the information based on changes, new developments or otherwise, nor any obligation to correct any errors or inaccuracies in the information. Past performance is no guarantee of future results. This document is not and shall not be construed as (i) an offer to sell or a solicitation of an offer to buy any security or any other financial product or asset, or (ii) a statement of fact, advice or opinion by Aon Securities.

Aon Benfield

13

Maintaining the average annual returns realized over the past five and ten years is challenging given current market dynamics. As spreads have continued tightening, interest payments to investors are lower than those received in prior years. Additionally, price increases in the secondary market will be muted relative to the previous periods—the ability for spreads to continue tightening to the same degree is reduced. This situation, however, is not limited to the ILS sector: fixed income investors face similar situations as interest rates have tightened over the past several years.

Figure 6: Historical performance of Aon ILS Indices

Figure 7: Aon All Bond index versus financial benchmarks

Aon ILS U.S. Hurricane

Aon ILS Index Aon ILS U.S. EQ

Aon ILS BB Index

260%

260%

180%

180%

100%

100%

20%

20%

-60%

-60%

CMBS 3-5 Year, Fixed Rate Index 3-5 Year U.S. Treasury Notes Index

ne

Ju

ne

Ju

ne

Ju

ne

Ju

ne

Ju

ne

Ju

ne

15

14

20

13

20

20

12

11

20

10

20

09

20

20

08

07

20

06

20

05

20

20

15

20

14

13

20

12

20

20

11

10

20

09

20

08

20

20

Source: Aon Securities Inc., Bloomberg


Ju

ne

Ju

ne

Ju

ne

Ju

ne

ne

Ju

Ju

ne

Ju

ne

Ju

ne

Ju

ne

Ju

ne

Ju

ne

07

06

20

05

20

20


Ju

ne

Ju

ne

Ju

ne

ne

Ju

Ju


14

Aon All Bond ILS Index ABS 3-5 Year, Fixed Rate Index S&P 500

Mergers and Acquisitions (Re)insurer Activity A significant amount of M&A activity was seen in the

Underwriters Holdings) and (iii) to achieve scale and stronger

(re)insurance space over the 12 months to June 30, 2015,

client relationships (XL Group/Catlin Group). Additionally, the

across non-life, life and health companies, and lines of

challenging organic environment caused by low interest rates,

businesses globally. According to Capital IQ, the global

excess capital, fierce competition from new alternative capital,

insurance sector M&A deal volume through the first seven

among others, is driving acquirers to become more efficient and

months of 2015 totaled $73.3 billion with 461 deals, compared

effective in utilizing existing capital. Finally, hedge funds continue

to $16.8 billion and 387 deals for the same period of 2014—

to assess opportunities to expand into the insurance sector. These

a deal value increase of 336 percent. As discussed earlier

asset managers’ unique investment expertise can mitigate the

in this report, the focus on this activity led some (re)insurers

risks associated with the current low interest rate environment.

to conclude it was not the right time to dedicate resources

Aon Securities believes that this acquisition motivation will

to a new catastrophe bond issuance.

continue into the near future.

The recent increase in M&A activity has been driven by the

Table 6 highlights recent selected activity in the (re)insurance

acquirers’ desire to expand (i) geographically (e.g. Tokio Marine

space, and includes transactions that extend beyond the primary

Holdings/HCC Insurance Holdings), (ii) into new products or

period under review.

distribution channels (e.g. RenaissanceRe Holdings/Platinum

Table 6: Select (re)insurance M&A activity Acquirer

Target

Rationale

RenaissanceRe Holdings

Platinum Underwriters Holdings

Broader client base. Accelerated U.S. platform growth.

Timing

Price (millions)

Closed March 2, 2015

$1,900

Closed May 1, 2015

$4,228

Closed July 31, 2015

$1,830

Expected close Q4 2015

$6,900


$7,500


$28,300

The agreed offer was struck at a price-to-book multiple of 1.1x and a 24% premium to the prevailing share price. XL Group

Catlin Group

XL Group plc is the ultimate parent, operating as ‘XL Catlin’. Establishes a premier specialty insurance platform.

Endurance Specialty Holdings

Montpelier Re

Increased scale and market presence, with new strategic capabilities added to Endurance (Lloyd’s and Blue Capital). Equated to 1.21x Montpelier fully converted book value per common share at December 31, 2014. Diversified platform across products and geographies.

Exor

PartnerRe

April 14: Italian investment manager EXOR made unsolicited all-cash offer to acquire 100% of PRE for $130 per share. EXOR is PRE’s largest shareholder (spent ~$600 million to acquire 9.9%). May 12: offer increased to $137.50 per share. July 7: enhanced terms including promise to pay PRE shareholders the value of $315 million AXS/PRE break-up fee (~$6.39 per share), 100 basis point increase on preferred share dividend and extension not to redeem until at least 2021, and “go-shop” provision. July 20: adds special dividend of $3.00 per share ($140.50 total offer). Aug 3: Definitive agreement.

Tokio Marine Holdings

ACE Ltd

HCC Insurance Holdings

Chubb Corp

Enhancement of Tokio Marine Holdings’ specialty P&C business in U.S. and internationally The purchase price represents a P/TBV multiple of 2.51x based on HCC Insurance Holdings’ Q1 2015 tangible book value Creating a global leader in commercial and personal P&C insurance. Balance sheet strength: combined total equity of almost $46bn and total assets of $150bn at the end of 2014. Total consideration of $28.3bn represents a ~30% premium to the share price at June 30 and values Chubb at 1.76x book value.

Source: Company press releases

9

Source: Bloomberg

Aon Benfield

15

Current market trends affecting M&A activity (Re)insurer stock price performance and valuation multiples

Increasing foreign (especially Asian) interest in the (re)insurance

continue to be positive. As summarized in the Aon Securities

market stemming from these companies’ desire to achieve

Weekly Public Market Recap, most global reinsurers’ and

diversification and augmented assets under management.

insurers’ stock prices and valuation multiples have continued

Increased competition and low global interest rates have

to appreciate. One reason for this positive performance is the

led foreign buyers to search for geographic and investment

continued strength in earnings from a benign catastrophe

diversification, as well as yield. This desire has driven them to

environment and stable loss reserve releases. Another

focus on (re)insurance companies in mature markets, such as

potential driver of the recent appreciation is investors’

Tokio Marine Holdings’ acquisition of HCC Insurance Holdings.

increased M&A expectations.

continue at historically high levels as companies seek to satisfy

additional M&A. Whether the pressure on earnings and

their strategic, diversifying and asset gathering objectives

returns is from new alternative capital market capacity or

through acquisition.

from traditional challenges (e.g. low interest rates, reduced favorable reserve development, excess capital, etc.), the need for improved capital utilization and operational efficiencies will increasingly stimulate buyers’ interest. Investors are accepting TBV dilution for transactions with compelling strategic rationale. Despite meaningful tangible book value dilution, investors have been very supportive of M&A transactions with meaningful strategic value.

16

Over the near term, Aon Securities expects M&A activity to

Continued pressure on underlying organic results will drive


ILS-Related Markets Figure 8: Alternative market development

Quota share sidecars Eight quota share sidecar transactions closed during the that disclosed sizes, as shown in Table 7. The majority of these

Sidecar Collateralized re and others

Catastrophe bonds ILW

80

12 months under review, totaling $955 million for the seven

68

70

64

transactions were renewals of existing sidecars, including the 60

expansion of Silverton Re Ltd. and Eden Re Ltd., which both USD billions

increased in size year-over-year. In addition to the renewal of Eden Re Ltd., Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft (Munich Re) sponsored a second sidecar— Eden Re II Ltd. during the 12-month period under review. Validus Holdings, Ltd. returned for the fifth consecutive

50

50

44

40

28

30

22

year, securing $155 million for AlphaCat 2015, Ltd. The latest

20

17

24

22

19

sidecar is in addition to the $409 million in capital raised for its managed sidecar—AlphaCat ILS Funds. The renewals of these

10

sidecars demonstrate the strengthening partnership between

0

reinsurers and alternative markets. In addition, Brit PLC (Brit) re-joined the group of (re)insurance firms utilizing third-party capital through its Versutus Ltd. sidecar. The transaction

2006 2007 2008 2009 2010 2011 2012 2013 2014 1H2015


Figure 9: Global reinsurer capital

provides investors with access to Brit’s worldwide property

800

catastrophe reinsurance business. In 2007, Brit accessed alternative capital with its Fremantle Ltd. and Norton Re Ltd.

Traditional capital

Alternative capital

700

transactions. It is also worth noting that Hannover Re increased

600

includes non-proportional reinsurance treaties, aviation, marine USD billions

6%

500 400

18%

385

410

-17%

18%

11%

-3%

505

470

455

-2%

6%

7%

its quota share facility to $400 million. For 2015, K-Cessions and energy risks.

Global reinsurer capital

575

565

540

400 340

300 200

368

388

321

378

447

428

461

490

511

497

17

22

19

22

24

28

44

50

64

68

100 0

2006 2007 2008 2009 2010 2011 2012 2013 2014 1H2015

Source: Individual company reports, Aon Benfield Analytics, Aon Securities Inc.

Table 7: Quota share sidecars launched during 12 months to June 30, 2015 Sidecar

Date

Silverton Re Ltd. Series 2015-I

Dec-14

Eden Re II Ltd.

Dec-14

Eden Re Ltd. Series 2015-I

Dec-14

Principal sponsor/manager

Size (millions)

Subject business

Aspen Bermuda Limited

$85

Property catastrophe reinsurance

Munich Re

$290


Munich Re

$75


Versutus Ltd.

Jan-15

Brit PLC

$75


AlphaCat 2015

Jan-15

Validus Holdings, Ltd.

$155


Harambee Re 2015

Jan-15

Argo Group

undisclosed

Property reinsurance

Sector Re V Ltd.

Apr-15

Swiss Re

$191


Lorenz Re Ltd.

Apr-15

PartnerRe

$84


Total

$955

Source: Press releases, public filings

Aon Benfield

17

Actively managed sidecars and start-up reinsurance vehicles Capital growth deployed in sidecars was not limited to

Table 8: Growth of selected managed sidecars between January 2014 and January 2015

quota shares arrangements. Actively managed sidecars also experienced significant growth as of January 31, 2015. Using

Size (millions)

fund structures, dedicated portfolio managers, and underwriting teams, many reinsurers are now providing asset management

Selected reinsurermanaged sidecars

Sponsors

As of Jan 31, 2014

As of Jan 31, 2015

services. These structures are more permanent in nature

Upsilon RFO

RenRe

$474

$621

than quota share sidecars, which typically have a fixed term.

Mt Logan Re

Everest Re

$370

$690

These arrangements can provide a reliable premium source

Kiskadee

Hiscox

$110

$400

by providing market access and liquidity. These features have

Source: Company filings, press releases

allowed some vehicles to grow quickly in recent years. Table 8 highlights three select vehicles that in aggregate have grown by

Secondly, a start-up specialty reinsurer—Fidelis Insurance Holdings

more than $750 million between January 2014 and January 2015.

(Fidelis) was announced. Similar to Watford Re Ltd., high-net worth and private equity investors were a key source of capital.

The trend of complementing underwriting results with an asset

Fidelis is focused on property and short-tail specialty insurance

management strategy continued in the period under review. This

business through the open (re)insurance markets. The firm was

was demonstrated by the announcement of two vehicles. Firstly,

founded by former Lancashire executives Richard Brindle and Neil

ACE Limited (ACE) and BlackRock, Inc. (BlackRock) have partnered to form ABR Reinsurance Ltd. (ABR Re).

McConachie, who will serve as CEO and CFO, respectively. Private

ABR Re will initially act as an internal reinsurer for ACE and follow

and CVC Capital Partners. In contrast to recent hedge fund

terms set by the reinsurance market. It is possible that ABR Re

reinsurers, the vehicle’s assets will be allocated to a variety of asset

may write insurance for other cedants at a later date. BlackRock

managers. The structure has the ability to tactically shift its capital

is the exclusive investment manager of the vehicle. ABR Re is the

between insurance and investment strategies to maximize return

first of its kind to pursue this strategy without securing a financial

on equity across the market cycle. The start-up specialty reinsurer

strength rating. The insurer is still to determine the impact on ABR

received a financial strength rating of “A-” from A.M. Best.

equity investors include Crestview Partners, Pine Brook Partners,

Re from the expected Chubb acquisition.

Both ABR Re and Fidelis intend to pursue initial public offerings to provide liquidity to investors.

Table 9: Select reinsurance vehicles launched since July 2014 Principal sponsor/manager

Launch size (millions)

Targeted IPO timeline

Subject business

Jun-15

Private Equity and Goldman Sachs

$1,500

3 – 5 years

Property and short-tail specialty lines

Apr-15

ACE and BlackRock

$800

3 – 6 years

Broad selection of ACE’s reinsurance treaties

Reinsurer

Date

Fidelis ABR Re

Source: Company filings, press releases

18


Collateralized reinsurance market trends Collateralized reinsurance was the largest growing component of

CSAM’s special purpose syndicate with Barbican provides the

alternative capital during the 12-month period under review. As

manager with a whole-account quota share covering Barbican’s

discussed earlier, a number of mutual funds focused on setting-

underwriting divisions: property, specialty, marine, aviation, and

up, or growing interval fund structures, which allow mutual

transport. Securis Investment Partners LLP (Securis) meanwhile

funds to invest in less-liquid transactions, such as collateralized

established its Lloyd’s Capital Provision fund, providing investors

reinsurance. From investors’ perspective, it provides access to

access to the Lloyd’s platform. According to Securis, the strategy

risks that may not be available in the catastrophe bond market.

is a way to maintain its diversification, of which Rob Procter,

The illiquid product provides reinsurance capacity (typically on

CEO of Securis, stated “None of this is really targeting property

an indemnity basis, similar to traditional reinsurance), without

cat, it is more spread across typical Lloyd’s specialty business,

the need for a rating.

so helping Securis to reduce its reliance on property

A number of ILS managers have also developed partnerships

catastrophe risks.”10

with fronting companies to offer more flexible solutions (e.g.

Another innovation in the market is the partnership between

reinstatements, longer commutation periods) to clients. As a

Nephila and wholesale broker AmWINS Group (AmWINS).

result, a significant share of collateralized reinsurance capacity is

Through this collaboration Nephila receives a share of property

placed through fronting companies. Using fronting companies is

insurance contracts brokered by AmWINS and in return

less prevalent in the retrocession market, where high rate-on-line

follows terms set by lead underwriters. This allows Nephila

premiums make collateralizing the limit more viable. The Global

to access the primary insurance market and allows AmWINS

Re Specialty team of Aon U.K. Limited estimates that close to half

to provide more meaningful capacity to its clients. Nephila’s

of the market’s retrocession capacity is provided in collateralized

participation will be fronted through Allianz Risk Transfer.

form, the majority of which was deployed by Bermuda funds.

This partnership, similar to its fronting relationship with State

Over the past year, several ILS managers have found innovative ways to incorporate additional operational leverage into

National Companies, demonstrates Nephila’s continued focus on growing its MGA platform.

their business model. Examples include Credit Suisse Asset

Finally, another more recent trend in the collateralized

Management’s (CSAM) rated vehicle Kelvin Re Limited, which

reinsurance market is the emergence of catastrophe bond

allows the underwriter to target a broader set of risks than

platforms that streamline private securitizations. These platforms,

those typically covered by collateralized markets. The ILS

which include Aon’s CATstream®, Kane SAC Limited and Market

manager has indicated it will use the vehicle to write risk where

Re, among others, aim to lower frictional transaction costs with

claims development may take a longer time than the standard

particular focus on lowering barriers to alternative capital for

development period of collateralized contracts.

sponsors. Our firm views private platform securitizations as a

In order to expand their book beyond property catastrophe, over past year several ILS managers followed the footsteps of Nephila Capital (Nephila) by directly accessing Lloyd’s.

natural development of the alternative market as access to the capital markets notes capacity expands to the entire market for risk transfer.

10 Source: Securis press release dated January 13, 2015

Aon Benfield

19

Industry loss warranty review

Surplus notes and subordinated debt

Lloyd’s syndicates, London and Bermudian reinsurers, as well

With interest rates at historically low levels, a number of insurers

as ILS funds continue to be active in the ILW market. Existing

were able to secure long-term financing via the debt capital

capital providers were joined by some new entrants prior

markets. Surplus notes, subordinated long-term debt instruments

to the 2015 U.S. hurricane season and were able to offer

issued by U.S. insurance companies, represent an interesting

meaningful capacity. In conjunction with other market factors

opportunity for investors. In the 12 months under review,

such as an increase in demand Q2 2015, this allowed the

insurers have issued surplus notes both on an investment grade

ILW market to increase to an estimated $4.0 billion from

and on a private placement basis. Reasons for utilizing surplus

$3.5 billion during the 12-month period under review.

notes include supporting organic growth initiatives, financing

From a recovery perspective, binary triggers remain the most sought-after method of execution with multi-section and

M&A activity and opportuistic purchases in the current rate environment. Table 10 shows a selection of investment grade surplus notes issued by insurance companies in 2014.

corridor structures being popular with protection buyers.

In addition to investment grade transactions, some insurance

Although indemnity coverage remains the product of choice

companies placed surplus notes on a private basis. Table 11

for retrocession buyers, there has been a noticeable increase

shows a selection of surplus notes issued on a private basis.

in the demand for ILWs for U.S. hurricane events, specifically

Aon Securities anticipates more mutual and stock insurance

Florida, from both traditional reinsurers and ILS funds.

companies will follow this path.

Following an increase in demand for U.S. hurricane capacity at mid-year renewals, the market witnessed a noticeable uptick

With Solvency II scheduled to go live on January 1, 2016,

in ILW pricing during this timeframe.

EU (re)insurance carriers across Europe are increasingly sourcing capital solutions to ensure they remain solvent under the

Figure 10: ILW trade volume and U.S. ANP price movement $80 billion ANP

to comply with regulatory guidelines, and have capital to

$50 billion ANP

$30 billion ANP

150

1500 1200

120

900

90

600 60

300 0

Q2 2011

Q2 2012

Q2 2013

Q2 2014

30

Q2 2015

Price movement by quarter

Total U.S. trade volume


new regulatory regime, have sufficient capital buffers in place

Legend ANP — All Natural Perils Source: The Global Re Specialty team of Aon U.K. Limited

20


underwrite opportunities that arise from potential disruptions in the market following its implementation. Firms have achieved or are looking to achieve these goals through a number of ways. In addition to reinsurance, which looks to reduce a carrier’s required underwriting solvency capital requirements, carriers are also raising Solvency II compliant Tier 1, Tier 2, and Tier 3 capital in the form of equity and debt that provides them with admissible capital to cover their total solvency capital requirement. Tables 12 and 13 show a select list of rated and unrated subordinated debt issuances.

Table 10: Select investment grade surplus notes Insurance Company

Issuance date

Pinnacol Assurance

Jun-14

Size (millions)

Term (years)

Coupon

Call date

Surplus note rating

$100

20

8.625% fixed

15 years

BBB- (S&P)

Mutual of Omaha Ins. Co.

Jul-14

$300

40

4.297% fixed

10 years

A (S&P)

Farmers Exchanges

Oct-14

$500

40

5.454% fixed (20 yrs) to floating

20 years

A- (S&P)

Source: Bloomberg, SNL and company filings

Table 11: Select private surplus notes issuances Insurance Company

Issuance date

Size (millions)

Term (years)

Coupon

Midwest Family Mutual Ins. Co.

Dec-14

$0.8

10

6.00% +10 yr. UST

Palomar Specialty Ins. Co.

Feb-15

$17.5

7

8.00% + LIBOR

Farmers Mutual Hail Ins. Co.

Mar-15

$60.0

30

7.375% fixed

Source: SNL, company filings

Table 12: Select investment grade subordinated debt Issuer name

Country

Allianz SE

Germany

Issuance date

Term (years)

Size (millions)

Coupon

Debt rating

Call date

Apr-15

30

€1500 ($1600)

2.241% for 10 years then floating

A+ (S&P)

10 years

SCOR SE

France

Jun-15

32

€250 ($278)

3.25% for 10 years, then reset

A- (S&P)

10 years

Society of Lloyd's

UK

Oct-14

10

£500 ($800)

4.75% fixed

A- (S&P)

N/A

Source: Bloomberg

Table 13: Select unrated subordinated debt Issuer name

Country

CIS General Insurance Ltd. (The Co-operative Insurance)

UK

Vardia Insurance Group ASA

Norway

Issuance date

Term (years)

Size (millions)

Coupon

Debt rating

Call date

May-15

10

£70 ($108)

12.00% for 5 years, then reset

Not rated

5 years

Jun-15

10

kr75 ($9.3)

6.70% + 3 month NIBOR*

Not rated

5 years

* Norway Interbank Offer Rate Source: Bloomberg

Aon Benfield

21

North America Perils Current market pricing conditions have generally stabilized

During the year, severe thunderstorm events eroded a large

around the lows first witnessed in 2014. As of year-end 2014,

portion of the retention below the bond and although

rates were almost universally down across all U.S. natural perils

ultimately not attaching, the secondary market pricing reflected

and risk levels compared to the prior year. However, during the

this near loss activity. The second transaction was MultiCat

second quarter of 2015 spreads surrounding lower risk profile

Mexico Limited Series 2012-I on behalf of FONDEN, Mexico’s

bonds began to tighten on the secondary market suggesting a

natural disaster fund. The bond’s parametric trigger, which

weakening in demand for such lower yielding bonds as discussed

is based on reported hurricane central pressure, was close to

in ILS Investor Activity—General Market Trends. Nevertheless,

activating when Hurricane Odile crossed the Class C notes’ zone

demand for U.S. property catastrophe bonds from both sponsors

perimeter in the Baja California Peninsula.

and investors remained strong over the period under review with more than $5.5 billion in U.S.-exposed property risk coverage

As the core of the catastrophe bond market, the U.S. property

secured through catastrophe bond capacity.

segment remains a central driver of ILS portfolio performance.

No trigger events occurred in the 12-month period ending June

of new property issuances, or 86 percent of the total notional

30, 2015 to impact the catastrophe bond market, continuing

limit, covered U.S. exposures. Six U.S. property transactions—

In fact, during the 12-month period under review 87 percent

the trend of benign loss activity since 2011. However, two

as shown in Table 14—closed in the second half of 2014 and all

transactions covering North America did come relatively close

were returning sponsors to the catastrophe bond market.

to attaching. The first was Gator Re Ltd. Series 2014-1 Class A, covering named storms and severe thunderstorms for American Strategic Insurance Group.

Tradewynd Re Ltd. Series 2014-1 provides American International Group, Inc. (AIG) with expanded indemnity coverage to now include named storms in Canada and Mexico, as well as earthquakes in Mexico. The $500 million transaction includes three classes of notes with maturities ranging from one to three years. The latest transaction brings the total from Tradewynd Re Ltd. to over $1 billion.

Table 14: Second half of 2014 property catastrophe bonds covering U.S. perils

Rating

Expected loss11

Initial interest spread

U.S. EQ

Modeled loss

BB+ (S&P)

0.25%

2.20%

NA EQ

Industry index

BB- (S&P)

1.46%

3.75%

1.18%

3.50%

CAL EQ

Indemnity

Not rated 2.55%

5.00%

Class

Size (millions)

Covered perils


Series 2014-1

Class A

$250



Series 2014-2

Class C

$500

Class A

$200


Ursa Re Ltd.

Series 2014-1

Issuer


Class B

$200



Series 2014-II

Class 4

$100


Amlin AG

Tramline Re II Ltd.

Series 2014-1

Class A

$200

U.S. HU, EQ & EU Wind

Class 1-B

$100

Class 3-A

$100

Class 3-B

$300


Tradewynd Re Ltd.

Series 2014-1


11 Annualized modeled expected loss; sensitivity cases if U.S. hurricane is a covered peril.

22

Trigger

Series

Beneficiary


NA/MEX/ CB/Gulf HU & NA/MEX/ CB EQ

Legend CAL — California CB — Caribbean EU — Europe MEX — Mexico

Indemnity

Not rated

1.79%

4.80%

Industry index

Not rated

5.71%

9.75%

B (Fitch)

2.41%

6.75%

BB- (Fitch)

1.24%

5.00%

B (Fitch)

2.36%

7.00%

Indemnity

NA — North America U.S. — United States EQ — Earthquake HU — Hurricane ST — Severe Thunderstorm

MI — Meteorite Impact VE — Volcanic Eruption WF — Wildfire WS — Winter Storm

Sponsors secured coverage for a variety of U.S. perils in the first

AIG’s second transaction in the 12-month period under review,

half of 2015 as shown in Table 15.

Compass Re II Ltd., utilizes a parametric index trigger based on reported maximum sustained wind speed and radius of

East Lane VI Ltd. provides the Chubb Group of Insurance

windstorms crossing the boundary points of the covered area

Companies (Chubb) with $250 million of indemnity Northeast

over a six-month term. This is the first parametric U.S. hurricane

multi-peril coverage for personal and commercial lines. The

transaction since 2005 and delivers relative cost savings

transaction is Chubb’s ninth catastrophe bond, but the first

versus AIG’s indemnity Tradewynd Re Ltd. Series 2014-1 North

to provide coverage for the non-modeled perils of volcanic eruption and meteorite impact. In addition, the latest issuance provides coverage for Chubb for the longest term yet, with a

America multi-peril transaction that was issued in the second half of 2014. The two transactions exemplify the breadth of the catastrophe bond market to provide both complex commercial

scheduled maturity in five years.

indemnity coverage as well as efficiently priced parametric cover to the same sponsor.

Table 15: First half of 2015 property catastrophe bonds covering U.S. perils

Beneficiary

Issuer

Series

Class

Rating

Expected loss12


Industry index

Not rated

8.60%

13.50%

Size (millions)

Covered perils

Trigger


Galileo Re Ltd.

Series 2015-1

Class A

$300


SCOR Global P&C SE


Series 2015-1

Class A

$150

U.S. HU, NA EQ

Industry index

Not rated

3.76%

7.00%



Series 2015-I

Class A

$250

NE HU, EQ, ST, WS, WF, VE, MI

Indemnity

BB (S&P)

1.34%

3.75%


Manatee Re Ltd.

Series 2015-1

Class A

$100

FL HU

Indemnity

Not rated

1.15%

5.00%



$100

U.S. HU, AUS CY

Industry index and modeled loss

Not rated

2.72%

5.75%


Merna Re Ltd.

Series 2015-1

Class A

$300

New Madrid EQ

Indemnity

Not rated

0.41%

2.00%

Class A

$150

Not rated

1.41%

4.75%


Citrus Re Ltd.

Series 2015-1

Class B

$98

FL HU (Initially)

Indemnity

Not rated

2.79%

6.00%

Class C

$30

Not rated

5.64%

9.00%


Pelican III Re Ltd.

Series 2015-1

Class A

$100

LA HU

Indemnity

Not rated

3.51%

6.00%


Cranberry Re Ltd.

Series 2015-1

Class A

$300 MA HU, ST, WS

Indemnity

B (Fitch)

1.38%

3.80%


Everglades Re II Ltd.

Series 2015-1

Class A

$300

FL HU

Indemnity

BB (S&P)

1.55%

5.15%


Class A

$300

B+ (Fitch)

2.68%

5.90%

Alamo Re Ltd.

Series 2015-1

TX HU

Indemnity BB- (Fitch)

1.58%

4.60%

BB- (Fitch)

1.18%

3.75%

Not rated

7.28%

11.00%

Not rated

2.50%

6.00%

B+ (Fitch)

undisclosed

undisclosed

Class B






Compass Re II Ltd.

Series 2015-1

$400

Class A

$300

Class 10

$50

Series 2015-I

Series 2015-1


Class 11

$100

Class 1

$300

NE HU, EQ, ST, WS

Indemnity


Indemnity

U.S. HU

Parametric index

Legend AUS — Australia FL — Florida LA — Louisiana NE — Northeast MA — Massachusetts

NA — North America TX — Texas U.S. — United States CY — Cyclone EQ — Earthquake

HU — Hurricane ST — Severe Thunderstorm MI — Meteorite Impact VE — Volcanic Eruption WF — Wildfire WS — Winter Storm

12 Annualized modeled expected loss; sensitivity cases if U.S. hurricane is a covered peril.

Aon Benfield

23

Model updates13,14 ILS modeling firms, Risk Management Solutions, Inc. (RMS)

In June 2015, AIR announced an updated hurricane model for

and AIR Worldwide Corporation (AIR), both introduced model

the United States. The latest view of risk from AIR features a

updates during the first half of 2015 covering North America

hydrodynamic location-specific storm surge module based

and specific to the peril of storm surge.

on storm parameters and elevation data. Inputs to the new

In March 2015, RMS released its latest view of North Atlantic hurricane risk. The new model along with software updates incorporates, in RMS’ view, the latest science and data on hurricane event rates, new insights to support wind-related underwriting, new capabilities to manage coastal flood risk, and a suite of vulnerability enhancements across several regions and lines of business. Specifically, new features include advances to

model include the U.S. Geological Survey (USGS) National Elevation Dataset (also used in the AIR Inland Flood Model) as well as the National Oceanic and Atmospheric Administration’s (NOAA) Sea, Lake, and Overland Surges from Hurricanes (SLOSH) model. Additionally, regional and seasonal data on tide heights, levees, seawalls, floodgates, pump systems, and other mitigating structures and equipment are also considered by AIR.

the storm surge model to improve loss modeling for flooded

Further model updates include the incorporation of the most

basements and high-value contents stored in basements. Such

recent North Atlantic hurricane database (HURDAT2) also from

updates include:

NOAA, reanalysis of data from 1930 to 1945, and the 2011

“Floors Occupied” field that captures the presence of basements at the location level enabled for the U.S., Caribbean, and Hawaii Hurricane Models; Ability to specify the percentage of total contents value

release of the USGS National Land Cover Database. Additionally, the vulnerability module incorporates the latest AIR view of observational data on the impact of square footage on wind losses for large, high-value homes and updates that reflect findings on the vulnerability of manufactured homes.

located at basement levels; and Expands the functionality of the model to include the ability to trigger business interruption based on content loss— not just damage to structures.

13 Risk Management Solutions, Inc. “North Atlantic Hurricane Models – Storm Surge Model Best Practices Version 15.0”, May 26, 2015 14 Verisk Analytics, Inc. Press Release—“AIR Worldwide Releases Updated Hurricane Model for the United States”, June 29, 2015

24


Europe Perils In the 12-month period ending June 30, 2015 the market for

UK ILS taskforce

catastrophe bond transactions covering Europe perils was

In the annual UK budget in March 2015, the UK Chancellor

relatively quiet with issuance limited to just three deals. A key

of the Exchequer George Osborne announced that the UK

challenge for the capital markets has been the resilience of the

government would develop a corporate and tax structure

traditional markets, which continue to offer competitive terms

that allows for issuers of insurance-linked securities, such as

on both price and coverage. Traditional pricing for top layer

catastrophe bonds, to be domiciled locally.

protections for many Europe primary programs has fallen below 2 percent—below the pricing floor we have observed in recent

In conjunction with the London Markets Group, an ILS task

catastrophe bond transactions.

force has been established with the aim of providing a working paper to the UK Treasury by the fall of this year. It will include a

In December 2014, Amlin returned to the market with its

recommendation on how to achieve the goal of encouraging ILS

second issuance from Tramline Re II Ltd. The transaction

business to London.

provides Amlin with per occurrence protection against U.S. named storms, U.S. earthquakes, and Europe windstorms

The view is that the London Market could offer the ILS market

over a four-year period. The industry index deal was upsized

significant benefits in terms of insurance infrastructure and a

to $200 million and closed below initial guidance, reinforcing

deep pool of capital and talent.

investors’ strong demand for higher yielding deals.

The UK faces competition from other European Union

In February 2015, Catlin returned to the capital markets with

jurisdictions, such as Malta and Gibraltar, that are competing

the second issuance from Galileo Re. Ltd. The transaction

for a share of the ILS market. The latter completed its first ILS

provides the sponsor with protection against U.S. named

transaction in April 2015, just 12 months after announcing its

storms, North America earthquake and Europe windstorms on

intention to become an ILS jurisdiction.

an annual aggregate basis. Finally in June 2015, Unipol-Sai Assicurazioni S.p.A. entered the catastrophe bond market for the first time with Azzurro Re I Limited. The transaction provides the insurer with per-occurrence coverage on an indemnity basis covering earthquakes occurring across western Europe. The transaction closed at the low end of guidance and was upsized to €200 million.

Table 16: Property catastrophe bond transactions covering Europe perils

Trigger

Rating

Expected loss


U.S. HU & EQ and EU Wind

Industry Index

Not rated

5.12%

9.75%

$300


Industry Index

Not rated

7.93%

13.50%

€200

EU EQ

Indemnity

Not rated

0.31%

2.15%

Series

Class

Size (millions)

Covered perils

Tramline Re II Ltd.

Series 2014-1

Class A

$200


Galileo Re Ltd.

Series 2015-1

Class A

UnipolSai Assicurazioni S.p.A.


Series 2015-1

Class A

Beneficiary

Issuer

Amlin AG


Legend EU — Europe NA — North America U.S. — United States

EQ — Earthquake HU — Hurricane

Aon Benfield

25

Greek crisis

Model updates15,16

During 2015, we witnessed a resurgence in market volatility

Independent risk modeling firms, RMS and AIR, both introduced

across the global markets with investors’ confidence again

model updates during the first half of 2015 covering Europe.

being challenged. The drawn out uncertainty in Greece and a significant market sell-off in China contributed to a weaker

In April 2015, RMS released an updated Europe Windstorm

global economic outlook.

Model Version 15.0. Along with a new Europe windstorm

On August 11, Greece reached a third bailout deal with its

research from recent events.

international creditors. The arrangement provides up to

industry exposure database, the release incorporates data and

€86 billion in exchange for austerity measurements.

Revisions include:

Currently, the impact to the ILS market has been almost

Stochastic hazard model—the event set includes updates to

non-existent with the dedicated ILS managers relatively unconcerned by the situation. However, some underlying investors did contact their respective ILS fund to inquire about any embedded Greek exposure. Since the overhaul of cat bond collateral solutions a number of years ago, any exposure to Greece within collateral solutions has been mitigated. The ILS asset class has again demonstrated its inherently low correlation to the performance of the broader financial markets.

both frequency and severity of the events based on enhanced calibration and interpolation approaches, an improved correlation model and the addition of recent wind data. The calibration reflects the wind historical event set from 1972 to 2013 in an effort to better reflect low-frequency events; and Wind vulnerability module—vulnerability curves and occupancy relativities throughout Europe were updated. Revisions were also made to the industrial facilities model, and the post-event loss amplification model. In March 2015, AIR released its Inland Flood Model for Central Europe. AIR expanded the model beyond Germany to also include Austria, Czech Republic and Switzerland. Revisions include: Precipitation patterns’ topography, soil type, snowmelt, nonlinear dynamic soil saturation and the probabilistic modeling of man-made flood defenses; Expansion of the river network; Inclusion of secondary modifiers include the existence of a cellar (basement), the floor of interest, flood zoning and custom flood defenses; and Damage assessment for buildings (for all lines of businesses) using a component-based approach to determine damage to the building fabric, fixtures and fittings, and services.

15 Risk Management Solutions, Inc. “Executive Briefing #1 and 2: Europe Windstorm Model Version 15.0”, September 22, 2014 and February 11, 2015 16 AIR Worldwide, “Scope of Model and Software Updates: Touchstone Version 3.0 and CATRADER Version 17.0”, Summer 2015 Release

26


Asia Pacific Perils Two catastrophe bonds covering Japan earthquake risk came

In March 2015, Tokio Marine & Nichido Fire Insurance Co.

to market from repeat sponsors during the 12-month period

Ltd. (TMNF) sponsored its second earthquake indemnity

ending June 30, 2015. The seasoned sponsors have become

catastrophe bond via Kizuna Re II Ltd. The transaction is the

increasingly sophisticated in the use of catastrophe bonds—

second Japanese yen denominated catastrophe bond placement

utilizing alternative capital to optimize their overall risk transfer

and covers commercial as well as industrial exposures.

strategy. In addition, China Property and Casualty Reinsurance

The Series 2015-1 notes provide TMNF with ¥35 billion of

Company (China Re) tapped the market with its first catastrophe

earthquake coverage for four years in exchange for a 2.00

bond, covering its earthquake book of business.

percent interest spread. Investor demand allowed TMNF to

In December 2014, the National Mutual Insurance Federation of Agricultural Cooperatives (Zenkyoren) secured an additional $375 million in coverage via Nakama Re Ltd. Zenkyoren is one of the largest buyers of vertical catastrophe reinsurance protection

increase the marketed size by 40 percent. Designed to protect against remote events, the Series 2015-1 transaction secured an investment grade rating “BBB-” from S&P—the first for a property catastrophe bond since 2008.

in the world. The Series 2014-2 issuance followed on the heels of

In July 2015, China Re sponsored its first catastrophe bond.

the $300 million Series 2014-1 issuance in May. The placement

Panda Re Ltd. Series 2015-1 (Panda Re) provides the sponsor

included a per occurrence and aggregate tranche, with risk

with $50 million in coverage for earthquakes across the

periods of four and five years, respectively. Each class of notes,

mainland of the People’s Republic of China (Hong Kong and

originally marketed at $100 million, was subsequently upsized to

Macau are excluded). Panda Re, which provides indemnity

$175 million for the Class 1 notes and $200 million for the Class

protection, closed with 4.05 percent risk spread and represents

2 notes. The Class 2 notes provide unique coverage through the

continued evolution of the ILS market with this new peril.

innovative floating three-year term aggregate structure. With this latest transaction, the total issuance under the Nakama Re Ltd. program has reached $975 million.

Table 17: Property catastrophe bonds covering Asia Pacific perils

Beneficiary

Issuer

National Mutual Insurance Federation of Agricultural Cooperatives

Nakama Re Ltd.


Kizuna Re II Ltd.




Series

Class

Size (millions)

Class 1

$175

Series 2014-2

Series 2015-1

Covered perils

JP EQ

Trigger

Rating

Expected loss


Not rated

0.58%

2.13%

Not rated

0.70%

2.88%

Indemnity

Class 2

$200

Class A

¥35,000

JP EQ

Indemnity

BB- (S&P)

0.02%

2.00%

$100

U.S. HU, AUS CY

Industry index and modeled loss

Not rated

2.72%

5.75%

Legend AUS — Australia JP — Japan U.S. — United States

CY — Cyclone EQ — Earthquake HU — Hurricane

Aon Benfield

27

Loss activity17 Overall economic and insured losses from natural disaster

Elsewhere, China endured Super Typhoon Rammasun which

activity in Asia Pacific were below average in 2014, which was a

was the costliest global tropical cyclone of the year. Damage

reversal from 2013 (slightly above the 10-year norm). The losses

was listed at $7.2 billion. In Australia, Cyclone Ita made landfall

in 2014 remain considerably lower than what was registered

in Queensland and caused $1.0 billion in damage. Most of

during the record-breaking year of 2011. One consistent

the sustained damage affected the agriculture industry. In the

story in Asia Pacific surrounds the large disparity between the

greater Brisbane metro region, a severe November hailstorm left

overall economic loss total and what percentage is covered

insured losses beyond $1.0 billion.

by insurance. The very high percentage of uninsured damage further highlights the low levels of insurance penetration in

April 1, 2015 reinsurance renewals

Asia Pacific, and particularly in regions that are often the most

Overall, the April 1 reinsurance renewal period concluded

vulnerable to significant natural catastrophes.

in line with expectations. The influx of alternative capital continued to play a role in the market’s softening. This was

The costliest insured event in Asia Pacific during 2014 occurred

witnessed on both earthquake and wind programs, despite the

in Japan. A series of powerful snowstorms left the heaviest

adverse development of the February 2014 winter weather loss.

accumulations in more than 45 years throughout several

In Japan, although it is currently limited, the use of collateralized

prefectures, including the greater Tokyo metropolitan region.

reinsurance continues to gradually increase.

The heavy weight of the snow and ice caused trees to snap and roofs to collapse, causing extensive damage to residential and commercial properties in addition to agricultural interests. Total insured losses were at least $2.5 billion, making this the fourthcostliest event in the Japanese insurance industry’s history.

Table 18: Top five most significant events in Asia Pacific in 2014 Date(s)

Event

September 2-15

Flooding

Location

Economic loss (billions)

Insured loss (millions)

India, Pakistan

$18

$700

October 12-14

Cyclone Hudhud

India

$11

$650

July 15-20

Super Typhoon Rammasun

China, Philippines, Vietnam

$7.2

$300

February 8-16

Winter Weather

Japan

$5.0

$2,500

August 3

Earthquake

China

$3.3

$150

Source: Impact Forecasting’s 2014 Annual Global Climate and Catastrophe Report

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Impact Forecasting’s 2014 Annual Global Climate and Catastrophe Report, dated January 2015


Life and Health Perils Extreme mortality and health catastrophe bonds

Embedded value securitizations

In the 12 months ending June 30, 2015, two non-property

In December 2014, Reinsurance Group of America (RGA)

catastrophe bonds came to market. ILS investors continue to

raised $300 million in an embedded value securitization via its

show strong demand for these types of diversifying risks. There

subsidiary Chesterfield Financial Holdings. The notes cover a

is currently over $1.5 billion in outstanding risk across health,

closed book of U.S. life insurance policies assumed by RGA Re

extreme mortality and longevity risks.

between 2006 and 2010, consisting of around 600 reinsurance

In January 2015, Aetna Life Insurance Company (Aetna) continued its trend of annual issuance with the latest Vitality Re offering. Vitality Re VI provides Aetna with $200 million in capital for three years. Similar to prior issuances, the transaction covers an increase in the medical benefit ratio (MBR) of certain commercial group health insurance policies. The notes

treaties covering over 100 separate life insurance groups. Investors received a fixed coupon of 4.50 percent for the notes, which secured an “A-” rating from S&P. The notes are expected to have an average life of 4.7 years based on independent modeling. Investors included a mixture of insurance companies and ILS funds18.

are issued via Aetna’s Vermont-based captive and provides

In January 2015, Aurigen Capital Limited (Aurigen) issued a

significant capital benefit to the cedant. Investors were again

CAD210 million embedded value securitization via Valins I

offered two classes of notes, with the more remote Class A

Limited. A portion of the proceeds was used to fully redeem

notes securing an investment grade rating of “BBB+” from S&P.

Aurigen’s Vecta I notes—issued in December 2011 for a coupon of

The $140 million Class A notes closed with a coupon of 1.75

8.00 percent. The latest notes, which are unrated, have a six-year

percent—the same coupon as a similar class issued in 2014. The

term and a coupon of three-month CDOR + 3.65 percent. The

$60 million Class B notes, which has an MBR attachment level

block of business includes 26 Canadian life reinsurance treaties

of 94 percent, closed with a coupon 2.10 percent. This reflects

written by Aurigen Reinsurance Limited between 2008 and 2013,

a decrease of 16 percent compared to the 2014 Class B notes,

covering business from 12 life insurers. According to Aurigen,

which were also more remote with an MBR attachment level of

the structure provides flexibility to add future new business and

96 percent.

continuous access to capital funding to support its growth19.

AXA Global Life returned to the life capital markets for the first

Longevity swaps / insurance

time since Osiris Capital plc in 2006. The new issuance, Benu

Defined benefit pension plans in the UK, parts of Western

Capital Limited, is the largest Euro-denominated ILS transaction

Europe, and now Canada continued to de-risk their liabilities

since the fourth quarter of 2013 and the second largest

by entering into longevity hedges. This involves passing on the

such on record. The extreme mortality transaction provides

risk that the firms’ pension plan population lives longer than

coverage across two tranches, each linked to France, Japan,

currently expected. The transfer can take place via a swap or in

and U.S. mortality. The five-year transaction utilized one-year

the form of (re)insurance via a captive or intermediary.

measurement periods, rather than the more typical two-year measurement periods seen in excess mortality transactions.

On the condition of the market, Martin Bird, senior partner and

The one-year measurement periods incorporate one-year

head of risk settlement at Aon Hewitt said: “The longevity swap

Attachment Levels. This was structured to ensure utility from the

market may well be perceived as having been rather stop-start.

final year which otherwise encourages exercising an early call.

But today, with over £50 billion of risk successfully transferred to the reinsurance market, the outlook is very different. The reinsurance market remains buoyant and is keen to capitalize on the investments made in terms of building capability and resource, in order to price, structure and execute deals. We see no shortage of capacity and can already see a deal flow of more than £20 billion during 2015.”

18 Press release from Reinsurance Group of America dated December 16, 2014 19 Press released from Aurigen Capital Limited dated January 15, 2015

Aon Benfield

29

He continued: “Innovation is also happening at the smaller end

Some investors are gathering assets in the fixed annuities

of the market. While there have been a number of ‘mega deals’,

business. Since costs for fixed annuities are generally fixed,

this may not be indicative of where the market is going next.

enhanced returns can be achieved from a wider spread between

After all, there are many more smaller-sized pension schemes

investment returns. In August 2014, Knighthead Annuity and Life

looking to de-risk and increase stability, so the significant

Assurance Company was launched by hedge fund Knighthead

interest for longevity risk from the reinsurance market is trickling

Capital Management, which specializes in distressed debt and

down into that territory. Deals of around £50 million are being

event-driven equity. The annuity company was capitalized with

priced and analyzed—a classic example of how smaller schemes

around $220 million in equity and received an A.M. Best rating of

can capitalize on the knowledge gained from the big deals.”

“B++” in March 2015.

Delta Lloyd entered into two longevity swaps over the past 12 months with Reinsurance Group of America to hedge €24 billion of underlying longevity reserves. Both swaps are structured as a derivative using Dutch population mortality results. The June 2015 swap has a duration of eight years, compared to six years for the August 2014 transaction. These swaps are part of an increase in the transfer of longevity risk by European companies in the wake of Solvency II.

In January 2015, Athene Holdings, a (re)insurer supported by Apollo Global Management, announced the acquisition of Delta Lloyd Deutschland AG. This added around €4.3 billion of assets onto its balance sheet. Nassau Reinsurance Group was launched in May 2015, supported by $750 million from Golden Gate Capital, a private equity firm. The group, which intends to seek a rating to meet its growth objectives, is focused on life, annuity, and long-term care sectors.

Table 19: Publicly disclosed longevity transactions since July 2014 Pension plan

Provider

Size

Date

Form

BT Pension Scheme

Prudential Insurance Company of America

£16bn

Jul-14

(Re)insurance20

AXA France

Hannover Re

Rothesay Life

Prudential Retirement Insurance and Annuity Company

€750mn

Aug-14

Swap

$1.7bn

Aug-14

Reinsurance

PGL Pension Scheme

Phoenix Life

£900m

Aug-14

Swap & Reinsurance21

Delta Lloyd Levensverzekering

RGA Re

€12bn

Aug-14

Swap

Legal & General Group


$2.2bn

Oct-14

Reinsurance

Rothesay Life

Pacific Life Re

£1bn+

Dec-14

Reinsurance

Merchant Navy Officers Pension Fund

Pacific Life Re

£1.5bn

Jan-15

(Re)insurance22

Rothesay Life


$450m

Jan-15

Reinsurance

ScottishPower U.K. Pension Scheme

Abbey Life Assurance Company

BCE (Bell Canada Pension Plan)

Sun Life Assurance Company of Canada

Pension Insurance Corporation


Delta Lloyd Levensverzekering

~£2bn

Feb-15

Swap

CAD$5bn

Mar-15

(Re)insurance23

Undisclosed

Apr-15

Reinsurance

Reinsurance Group of America

€12bn

Jun-15

Swap

Pension Insurance Corporation


£1.6bn

Jun-15

Reinsurance

AXA U.K. Group Pension Scheme

Reinsurance Group of America

£2.8bn

Jul-15

Swap

Source: Company press releases

20 21 22 23

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BT Pension scheme transferred longevity risk to a wholly owned company, which acts as an intermediary with reinsurer Prudential Insurance Company of America Phoenix Life Limited is owned by the sponsor, Phoenix Group, and will act as an intermediary between the scheme and reinsurers Structured as an insurance agreement between MNOPF and MNOPF IC Limited (a specially established Guernsey company), and a reinsurance agreement between MNOPF IC Limited and Pacific Life Re Sun Life will reinsure a portion of the longevity risk to RGA Canada and SCOR Global Life


A Market Discussion with ILS Investors A panel interview hosted by Aon Securities Aon Securities recently discussed a number of topics on the ILS market with five active investors. The conversation, transcribed in this section, provides insight into their views and aspirations for the market as a whole. Our panel included: John DeCaro—Founding Principal, Elementum Advisors Adolfo Pena—Principal, Nephila Capital Caleb Wong—Portfolio Manager, Oppenheimer Funds Inc., Global Asset Management Chin Liu—Vice President and Portfolio Manager, Pioneer Investments Dirk Lohmann—Chief Executive Officer and Managing Partner, Secquaero Advisors AC.

Aon Benfield

31

John DeCaro—Elementum Advisors Founding Principal

1. Please provide an overview of your firm and your role I am a Founding Principal and lead portfolio manager for catastrophe bond investments at Elementum Advisors.

5. There’s been plenty of news coverage recently on Greece’s issues with debt and potential Eurozone exit. Do you see the financial markets impacting the ILS market?

Founded in 2009, Elementum is a leading investment

Definitely. During the third phase of Quantitative Easing by

manager in the collateralized reinsurance and catastrophe

the Fed (9/13/12 to 10/31/14), the catastrophe bond market

bond space.

grew by 48 percent while the market spread declined by 254 bps. We believe that the global decline in yields

2. Where are you finding alternative investment opportunities in today’s markets?

spurred incremental investments into the ILS market and drove risk spreads materially lower. We believe that while

We have identified several unique investment opportunities

meaningful capital is invested in ILS for diversification

within the past 18 months to provide meaningful capacity

reasons, the marginal investment is impacted by the returns

directly to selected counterparties facing specific needs

in other financial markets. Over the past few years, the ILS

resulting from regulatory or rating agency actions.

market looked attractive on a relative basis. This will not

These opportunities have been less sensitive to overall

always be the case.

market conditions.

3. How has your decision-making process for ILS investments impacted your AUM? We deliberately attempt to match our AUM growth with

We focus exclusively on natural catastrophe risks, so our

our ability to appropriately invest in accordance with client

hypothetical portfolio would consist largely of risks in peak

investment objectives. As we deepened our understanding

zones with significant capacity needs. We would consider

of client interests and found broader investment

blending in smaller positions in non-peak areas where robust

opportunities, we have been able to grow our AUM.

catastrophe models exist. We are generally indifferent to the

4. The ILS market has provided sponsors with broader coverage in the last couple of years (e.g. perils, types of risk, indemnity provisions). a. Do you think this is a natural evolution based on better understanding of the covered risks? To a certain extent, yes. We would posit that an equally meaningful driver has been the natural expansion of terms and conditions resulting from an excess of capital seeking yield. b. What new segments of (re)insurance will be supported by alternative capital next? That’s a very difficult question to answer. Given the abundance of capacity across virtually every line of reinsurance, we believe that it’s more likely that alternative capital will simply flow back into the markets most affected by the next major catastrophe loss event.

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6. If you could put together a hypothetical portfolio, what types of risks, geographies and sponsors would you consider?


type of sponsor as long as there is sufficient transparency of the underlying portfolio of risks we are assuming and we feel like we can perform adequate counterparty due diligence.

7. Did you download the movie “The Interview”? How do the risk transfer markets cover a growing global epidemic of cyber attacks? I did not. The traditional reinsurance markets are best suited to be the primary providers of specialized, non-commodity types of insurance coverages such as cyber and terrorism risk.

Adolfo Pena—Nephila Capital Principal

1. Please provide an overview of your firm and your role Nephila Capital Ltd is a leading investment manager specializing in reinsurance risk, and is the largest institutional asset manager of investment funds dedicated to natural catastrophe and weather risk. Nephila offers a broad range of investment products focusing on instruments such as insurance-linked securities, catastrophe bonds, insurance swaps, and weather derivatives. Nephila has assets under management of approximately $9.5 billion as of June 30, 2015 and has been managing institutional assets in this space since it was founded in 1998. The firm has over 100 employees based in Bermuda (headquarters); San Francisco, CA; Nashville, TN; and London. My role within Nephila is the Chairman of the Investment and Allocations committee which is the equivalent to the Chief Underwriting Officer in a reinsurance company or the Chief Investment Officer in a hedge fund. I oversee risk pricing, portfolio construction and trading strategy on behalf of our investors.

2. Where are you finding alternative investment opportunities in today’s markets? Nephila’s investment strategy focuses exclusively on

4. The ILS market has provided sponsors with broader coverage in the last couple of years (e.g. perils, types of risk, indemnity provisions). a. Do you think this is a natural evolution based on better understanding of the covered risks? By ILS I assume we are talking about catastrophe bonds here. So yes, catastrophe bonds came to the market as an alternative to the traditional reinsurance product and it is just natural, as investors become more familiar with the asset class, that catastrophe bonds become more like reinsurance. The original parametric deals were issued as a way for the pioneer investors in the asset class to get comfortable with the risk and as they become more familiar with reinsurance the market has migrated to indemnity; that being said, the one type of coverage were indemnity is still not appropriate is retrocessional coverage: the opacity of the portfolios and information asymmetry between the issuer and the ultimate holder of the risk is too great to use an indemnity trigger, so we believe that that type of risk transfer is more safely assumed on a parametric basis. b. What new segments of (re)insurance will be supported by alternative capital next?

catastrophe and weather risk so we are a specialist in the

Hard to tell. We focus on catastrophe and weather risk that

space and we don’t look at other alternatives.

isn’t fully supported by the reinsurance market so to the extent that there is a shortage of capital to service a certain

3. How has your decision-making process for ILS investments impacted your AUM? Nephila had significant growth between 2008 and 2013 as the asset class gained acceptance with institutional investors. Nephila has remained for the most part closed to new investments since 2013 as we don’t see the need to bring

segment, you can expect alternative capital to fill the void.


more capital into the current reinsurance market. We have

Not really. That being said, in our market as in any other

seen new investors come in while older investors reduce their

market, there are opportunistic players and long term players;

allocations to the space but overall our AUM has remained

to the extent that the Eurozone crisis creates more attractive

flat over the past 30 months and we intend to keep it this way

opportunities elsewhere you can expect some investors

until we can find new opportunities to deploy capital.

to redeploy the capital currently invested in ILS into these opportunities. Another unlikely scenario is that the crisis worsens to such extent that investors have to retrieve the capital deployed to ILS to cover shortfalls elsewhere; we lived this situation in 2008 and it just proved the non-correlation argument we had been making, prompting investors to allocate even more capital to ILS once the immediate shock of the crisis passed. Aon Benfield

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Caleb Wong—Oppenheimer Funds Inc. Global Asset Management Portfolio Manager

6. If you could put together a hypothetical portfolio, what types of risks, geographies a nd sponsors would you consider? At Nephila we believe that capital should go to where it’s needed. As such, there should be ways for societies in general to transfer risk to the market. At Nephila we talk a lot about the concept of unmet demand—where there is a lot of catastrophe risk that is being held by actors that would be better off transferring risk: property owners holding earthquake risk due to low insurance penetration rates in California; government entities insuring large segments of the population; state governments being implicitly dependent on the federal government for disaster recovery and reconstruction; sovereign governments assuming catastrophe and weather risk. All of the above are risks that we would like to put into a hypothetical portfolio. At Nephila we spend a significant amount of effort trying to devise solutions for all of the above and overall, we have been successful in helping shape such risk transfer mechanisms.

7. Did you download the movie “The Interview”? How do the risk transfer markets cover a growing global epidemic of cyber-attacks? No, I didn’t download the movie. As mentioned above at Nephila we focus on catastrophe risk. For now it seems like transfer of cyber risk is well handled by the market and there is no need for alternative forms of capital to step in. To the extent that there is an industry need and we develop clear ways to evaluate and price cyber risk we could consider offering that coverage.

1. Please provide an overview of your firm and your role OFI Global Asset Management is built upon the heritage of OppenheimerFunds, and over five decades of global investing. As of June 30, 2015, it has $234.4 billion in assets under management. The firm offers a full range of investment solutions across equity, fixed income and alternative asset classes. OFI Global Asset Management consists of OppenheimerFunds, Inc. and certain of its advisory subsidiaries, including OFI Global Asset Management, Inc., OFI Global Institutional, Inc., OFI SteelPath, Inc. and OFI Global Trust Company. I am responsible for OFI Global’s portfolio management capabilities in the insurance linked securities markets. We invest primarily in the 144a catastrophe bond market and have been active in this market since the asset class’s inception in the late 1990s. At OFI Global, we combine highly specialized quantitative portfolio management with intensive credit analysis to implement value added risk-return profile for our catastrophe bond investments.

2. Where are you finding alternative investment opportunities in today’s markets? We continue to believe that the insurance linked securities markets offer alternative investment opportunities for investors. There are three reasons: (1) the sector continues to exhibit low correlation properties with traditional and alternative asset classes, including equities, traditional fixed income, real estate, to name a few; (2) the return/risk reward is comparable to traditional fixed income securities with default features, including high yield; (3) the insurance linked market continues to grow as it reflects an ongoing transformation of the traditional reinsurance market.

3. How has your decision-making process for ILS investments impacted your AUM? We have deployed ILS investments within our mutual fund and institutional accounts. We believe that our investments have enabled us to highlight and provide value-added returns for our clients and further differentiate our product lines, thus leading to AUM growth.

34


4. The ILS market has provided sponsors with broader coverage in the last couple of years (e.g. perils, types of risk, indemnity provisions). a. Do you think this is a natural evolution based on better understanding of the covered risks?

6. If you could put together a hypothetical portfolio, what types of risks, geographies and sponsors would you consider? In our investment process, we deploy a quantitative portfolio construction process to manage the peril and geographical risks of the catastrophe bond market. As it is well known

ILS investors continue to have access to improved modeling

today, the ILS and catastrophe bond markets continue to be

technology and investors with traditional reinsurance

highly concentrated in peril-regions where there is structural

backgrounds are entering the asset management side. The

demand for insurance. Florida is the best example as home

two trends have allowed dedicated ILS funds to elevate their

owners are required by law to have homeowners insurance

capability such that they are able to evaluate and invest in

against hurricane events. At the same time, there are a

securities with varying forms of reinsurance risks.

great number of perils and regions where insurance and reinsurance are not well-developed for economic, political

b. What new segments of (re)insurance will be supported by alternative capital next? We believe that the capital markets will have a greater level of role in specialized reinsurance markets. Again, the evolution reflects the continued convergence of capital markets and traditional reinsurance.

5. There’s been plenty of news coverage recently on Greece’s issues with debt and potential Eurozone exit. Do you see the financial markets impacting the ILS market? I do not believe that the current Greek debt crisis and its possible impact to the European Union will have as much impact on the ILS market as it would with traditional asset markets. On the other hand, I believe that in a scenario where

and cultural reasons. An ideal portfolio would have exposure in peak perils such as U.S. windstorm and earthquake but also diversify into risks that impact other parts of the world yet to be introduced to the ILS marketplace.

7. Did you download the movie “The Interview”? How do the risk transfer markets cover a growing global epidemic of cyber attacks? I have not had the opportunity to see “The Interview” but I do recognize the growing demand for insurance against cyber-attack. I believe that the risk transfer markets will continue to service this growing market and that there will be efforts and investment toward measuring this risk so that the broad audience of capital providers in the insurance and reinsurance market place will be willing to take on this risk.

if Greece were to exit the European Union, it could impact the ILS and reinsurance market in a couple ways. First, if the exit were to negatively impact the Euro currency, then ILS securities denominated in that currency will be immediately affected. It is important to note that investors can remedy this risk by hedging the currency with their home currency. Second, ILS securities with collateral in European short-term investments, such as notes issued by the European Bank for Reconstruction and Development (EBRD), could face credit rating changes, triggering provisions requiring that the collateral be re-invested. While reinvestment would be a nonevent, I would foresee some modest pricing impact on the ILS securities as the market prices any uncertainty involving collateral conversion. Finally, there is the longer term impact of a Greek exit—especially one that triggers a collapse of the European Union—on insurance and reinsurance markets in Europe. It is unclear how it could unfold but we believe that the ILS market would benefit in outcomes where there is a greater demand for reinsurance that arises from the collapse of a currency union. Aon Benfield

35

Chin Liu—Pioneer Investments Vice President and Portfolio Manager

1. Please provide an overview of your firm and your role Pioneer Investments is a global asset manager with about €220bn under management. Charles Melchreit is a Senior Vice President, Director of Investment Grade Management, and Portfolio Manager. Chin Liu is a Vice President and Portfolio Manager. Together they are responsible for the management of Pioneer’s ILS positions. Supported by a team that includes analysts from Risk Modeling and Risk Management, Credit Research, and Equity Research, they determine ILS risk allocations and source new deals for all of Pioneer’s Boston-based portfolios.

2. Where are you finding alternative investment opportunities in today’s markets? In our mind, there are multiple approaches to alternative

4. The ILS market has provided sponsors with broader coverage in the last couple of years (e.g. perils, types of risk, indemnity provisions). a. Do you think this is a natural evolution based on better understanding of the covered risks? Yes, we think so. New infrastructure and technology help cedants gather portfolio information and aggregate risks much more efficiently. Catastrophe modeling firms have continuously improved their models, incorporating the latest research. It provides more transparent analytics for investors. Given the demand for more supply of diversifying assets and a better-educated investor base, it is a natural evolution. b. What new segments of (re)insurance will be supported by alternative capital next?

investing. One is alternative investment strategies that seek

The continued increase in knowledge of, and comfort with,

uncorrelated returns versus traditional asset classes, such as

insurance risk within the alternative capital community will

long-short fixed-income; another is alternative asset classes

drive a higher demand for diversifying elements in deals.

such as REITs, commodities and ILS. As valuation of the

Within the property space, investors may look to expand the

general financial market gets more and more expensive,

risk into the primary insurance lines or risk associated with

investors are looking to diversify their portfolios and seeking

developing countries. We may also observe increase support

non-correlated returns. ILS fits investors’ need very well. We

of non-property catastrophe risks, such as aviation, marine,

think ILS is a very attractive allocation within our multi-sector

and agriculture.

portfolios. Unlike many alternative asset classes or strategies, we find that the ILS sector is characterized by relatively transparent, measurable risks, and in contrast to financial market risks, these exhibit relative intertemporal stability.

3. How has your decision-making process for ILS investments impacted your AUM? Not applicable.

5. There’s been plenty of news coverage recently on Greece’s issues with debt and potential Eurozone exit. Do you see the financial markets impacting the ILS market? Not in the short term. We believe the ILS market is very much independent of financial markets. Current ILS investors are in the market for the long term. However, after a massive loss in the financial markets, there could be many attractive investment opportunities as financial risk reprices. Crossover investors may therefore demand higher return potential from the ILS market as their potential investment returns in other markets become more compelling.

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Dirk Lohmann—Secquaero Advisors AG Chief Executive Officer and Managing Partner

6. If you could put together a hypothetical portfolio, what types of risks, geographies and sponsors would you consider? The current ILS market is at a soft point during the reinsurance cycle. The risk curve has flattened. Investors are not being compensated by owning significant risks down the risk tower.

1. Please provide an overview of your firm and your role Secquaero Advisors Ltd. is a specialist advisory firm in the areas of Insurance Linked Securities and Risk Management for (re)insurers.

Therefore, this is a time to stay defensive and disciplined. We

As an Insurance Linked Securities (ILS) specialist, we provide

would be looking to reduce portfolio risks by taking more

investment solutions to clients seeking exposure to insurance

remote risks, improving portfolio diversification, providing

linked risk assets within their portfolio. We are the exclusive

coverage to larger cedants or seeking index-driven deals, and

ILS investment advisor to Schroder Investment Management

avoiding transactions with adverse selection.

(Switzerland) AG which acts as investment manager for a

7. Did you download the movie “The Interview”? How do the risk transfer markets cover a growing global epidemic of cyber-attacks? No, I did not download the movie. Actually, I have not watched the movie yet. However, I am aware of the incident. Cyber risks have been discussed quite a lot these days. At this moment, we are still waiting for a few developments before we can fully evaluate the risk. First, some legal and regulatory development is a prerequisite for insurers and investors to better specify the coverage and identify the potential liabilities and losses. Second, there needs to be a systematic

range of ILS funds and mandates that cover a spectrum from pure catastrophe bond mandates to all ILS solutions which can include life transactions or man-made risk. Secquaero is majority-owned by its founders and employees. Schroder International Holdings Ltd. holds an equity stake in Secquaero since June 2013. Through our cooperation with Schroder Investment Management, Secquaero is able to provide its clients with the regulatory, governance and compliance framework needed for an institutional product offering focused on alternative reinsurance business including collateralized reinsurance.

approach to model and analyze the potential losses, as we do

At Secquaero we have a team of 14 professionals stemming

not have much historical loss information in this area.

from the reinsurance industry, complemented by 8

Lastly, a demand surge from protection buyers creating

professionals at the Schroders ILS desk which, for all intents

attractive return profiles will be needed to motivate investors

and purposes, operates as one integrated team. My role

to invest in the required research before allocating capital.

as Chairman and CEO of Secquaero is primarily focused

Rather than cyber risk being another peril represented in the risk transfer markets alongside traditional risks, it seems more likely that we will see the emergence of a specialized engineering/insurance discipline evolve to

on product development and origination of underwriting opportunities for the funds that we advise.

2. Where are you finding alternative investment opportunities in today’s markets?

support this risk-taking. An analogy here might be the

The team at Secquaero bring decades of reinsurance industry

development of the steam boiler insurance industry in

experience to the table and have established relationships

the 1860s, where companies provided both engineering

with many market participants. As a consequence, generating

services to mitigate risk and insurance services to protect

deal flow per se is not that great a problem. Our ability to

against unavoidable risks.

look beyond simple catastrophe model outputs and to quote complex risks, structure and execute private or syndicated transactions developed entirely from a clean sheet to meet a sponsor’s needs generates opportunities outside of the narrowly defined property catastrophe field.

Aon Benfield

37

One area that we are looking to further develop is what I

community which was confirmed when the combined team

would classify as portfolio linked securitizations as opposed

won the ILS Investor of the Year award at this year’s Trading

to event driven securitizations. These could be in the area of

Risk Awards dinner.

financing the future profits of a block of in-force life insurance policies (Value of In-Force) or potentially in providing capital relief on broadly defined portfolios in a solvency or regulatory capital context.

3. How has your decision-making process for ILS investments impacted your AUM? Early in the company’s development it actually hindered our growth in assets. That was because our first fund was an unconstrained ILS fund that could entertain all classes of insurance risk, both on an event or a portfolio based securitization and including life as well as non-life catastrophe exposures. It turned out that this was perhaps a bit ahead of its time as most investors initially wanted a catastrophe only product. In the interim, we have broadened our range of fund offerings so that we can offer a full range of styles. Interestingly, now the unconstrained “All ILS” strategy is beginning to find more favor with investors, particularly those who have already been in the catastrophe space for a longer period of time and are now beginning to appreciate the appeal of being able to capture other opportunities outside of catastrophe risk, which has become an increasingly crowded space.

4. The ILS market has provided sponsors with broader coverage in the last couple of years (e.g. perils, types of risk, indemnity provisions). a. Do you think this is a natural evolution based on better understanding of the covered risks? I think that it is a development driven by the increasing importance of specialist managers in the space. Prior to 2009 the market from a capacity perspective was dominated by multi-strat hedge funds as opposed to dedicated ILS managers. The dedicated managers have drawn the bulk of their staff from the reinsurance industry and bring with them a far greater familiarity of the customs and practice in the reinsurance industry as well as the needs of the ceding insurers / sponsors. Having said that, I am also somewhat concerned when I see transactions offering the sponsor elements of optionality, such as variable resets or call features and early funding without any compensation to the investor for granting these. b. What new segments of (re)insurance will be supported by alternative capital next? Conceptually I think there are a number of areas where

38

I also am convinced that our decision to link up with

alternative capital might be employed. The key issue is

Schroders as a partner was critical to our growth in AUM.

that the structure and risks covered must be ones that

Before linking up with Schroders we faced an uphill battle

meet the needs of a collateralized market and support the

in winning mandates from larger institutional clients. As

fundamental value proposition supporting an allocation

a small boutique we ended up spending a lot of time

to this alternative asset. With respect to structure, the key

educating potential investors on the benefits of investing in

constraint is the need for certainty as to whether collateral

ILS only to see them allocate to a larger institutional branded

supporting a given transaction is impaired by losses or not.

peer. Through our alliance with Schroders we now offer a

The individual transactions are usually unlevered, unlike the

fully compliant framework that meets the needs of a large

balance sheet of a traditional reinsurer, so we can only earn

institutional client and this is what I think it takes given the

a risk premium when the collateral is unencumbered and

increasing regulatory requirements and growing involvement

free to be redeployed to support new risk once an existing

of institutional investors in this asset class. I would add

risk has expired. This gets tricky for longer tail insurance

that the link-up with Schroders has not had an impact on

classes and can only be resolved by agreeing some form

our assessment or decision making process on individual

of crystallization of incurred losses that allows for a quick

transactions. Rather, it has relieved Secquaero from much of

discovery of whether the collateral is impaired or not.

the “burden” associated with managing a fund in terms of

This makes liability exposures on a per risk or per event

compliance, mid/back-office, admin, trading and increased

basis challenging. On the other hand, one could consider

our ability to entertain new opportunities with a meaningful

protections on a portfolio basis using aggregate structures,

capacity to move the market forward. Together the combined

provided the both parties are willing to consider an accident

team has become a meaningful participant in the ILS

year basis for determining the performance.


With respect to my second point, that the risks covered

Interestingly, the Catastrophe Bond market has been

support the fundamental value proposition of allocating to

experiencing a modest degree of spread widening since

insurance risk as an asset class, I need to stress the point that

about mid-October last year when looking at movements

the key selling point of insurance risk is its low correlation to

in the secondary prices for outstanding bonds. This has had

other financial risk assets. This means that the line of insurance

a dampening impact on performance and AUM growth

subject to the transaction should not be influenced by, or

particularly during the latter part of the first half of 2015.

strongly correlate with, macro-economic trends or market

During the second quarter we have also witnessed a reversal

risk. In my opinion this rules out classes such as mortgage

in the trend for long term bond yields which began increasing

insurance, credit and surety, certain lines of professional

in early May. This shift has begun to make its mark in the

liability (i.e. Bankers E&O / D&O) and possibly also cyber and

investment returns of many reinsurers second quarter results

terror on a stand-alone basis. On cyber and terror I am just

and it will be interesting to see whether the drop in reported

not sure whether one can credibly argue that a major event

earnings in an environment of otherwise low catastrophe

that would potentially impact ILS investors would not also

losses will stiffen the resolve of reinsurance markets come the

have repercussions on financial markets. Another challenge

next renewal.

with these two exposures is that we also represent to our investor clients that we understand and can price the risk. Here I remain skeptical as to whether there is really sufficient data available to do this.

6. If you could put together a hypothetical portfolio, what types of risks, geographies and sponsors would you consider? My idea of an ideal portfolio would include a mix of


catastrophe and non-catastrophe risks, which could also include portfolio based securitizations in addition to event driven transactions. Adding non-catastrophe and portfolio based transaction would add diversification and ameliorate

I think it is fair to say that fiscal policy (whether you call it QE

the inherent tail heavy risk contained in a catastrophe only

or financial repression) post 2008 and ensuing Euro Crisis has

portfolio. The portfolio based transactions could be on life

had an impact in that it has inflated the price of all financial

(Value of In-Force financing) and for non-life may include

assets and potentially pushed some investors into the space in

protections on movements in reserves to address capital /

the search for yield. Probably more important though was the

solvency related issues. The key challenge will be to get such

impact on traditional reinsurers; there unrealized capital gains

deals structured in a manner which allows a capital market

expanded as yields dropped resulting in a substantial increase

investor the ability to achieve certainty with respect to a

in available capital. The persistently low yields on high quality

potential impairment of his collateral, so that free collateral

government bonds (U.S. treasuries and German Bunds) have

can be redeployed quickly. On that catastrophe side, my wish

resulted in lower ROE hurdles for the reinsurers since these are

would be for more geographies, such as Latin America, Asia

typically expressed as a spread (i.e. 750 bps) over a reference

and even Europe to be included in the portfolio to diversify

risk free rate (rolling average of 5 year governments). This

against the peak U.S. exposures, but realistically I feel that

increase in capital, coupled with lower absolute return hurdles

chances for finding diversification at reasonable returns are

and a low level of catastrophe losses over the past several

greater in the non-catastrophe portfolio based transactions

years has put immense pressure on prices and has also been

than they are in non-peak catastrophe risk. Pricing today on

reflected in the ILS market where spreads have compressed

most non-peak catastrophe is simply too competitive to write

considerably from their peaks in 2009.

on a stand-alone basis and buying expensive non-peak risk simply for diversification doesn’t make sense.

Aon Benfield

39

7. Did you download the movie “The Interview”? How do the risk transfer markets cover a growing global epidemic of cyber attacks? No, I did not, but I did read about the attack on Sony Pictures Entertainment and the consequences it had with respect to how the film ultimately made its way to the public. The issue of cyber risk and the potential damage that these can unleash on the impacted entities or economies are truly concerning. It appears that this is one area where Hollywood’s fantasies can hardly stay ahead of reality. Only a few months ago I saw a documentary about the potential weaknesses in the cyber security of automobiles and now we read about Chrysler and other manufacturers having to recall their vehicles for a security patch. I’m a big fan of Bruce Willis and the “Die Hard” series, but what is scary is that many of the scenes in Die Hard 4.0 are probably not all that far from the truth. The so-called internet of things has resulted in an interconnected world where the potential for wide spread contagion and resulting damage is huge. As I stated previously, I question whether there is sufficient data available to properly price this risk today.

40


Appendix I Catastrophe Bond Issuance Statistics As of June 30, 2015 Source: Aon Securities Inc.

Aon Benfield

41

Figure 1: Catastrophe bond issuance by year, 2006 to 2015 (years ending June 30) Property issuance

Life and Health issuance

10,000

9,400 8,145

USD millions

8,000

6,431

6,981

6,665

5,914

6,000

4,736

4,382

4,000

3,279

1,705

2,000

0

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015


Figure 2: Outstanding and cumulative catastrophe bond volume, 2006 to 2015 (years ending June 30) Property outstanding

Cumulative property issuance

Life and Health outstanding

Total cumulative bonds

70,000

67,083 60,102

60,000

USD millions

50,702

50,000 44,037 37,605

40,000 33,223

30,000

26,782

28,487

20,867

20,000 12,723

10,000

16,155 12,911

13,174

13,167

2009

2010

15,123

22,422

23,467

2014

2015

17,788

11,504

6,558

0 2006 Source: Aon Securities Inc.

42


2007

2008

2011

2012

2013

Figure 3: Catastrophe bond issuance by half-year 2008 – 2015 January - June

9,000

July - December

8,000 2,325

USD millions

7,000 6,000

3,498

5,000

2,692

4,000 3,000

2,625 2,843 320

5,902

2,086

1,000 0

4,656

3,973

3,588

2,000 2,650

2,510

1,757

1,385

2008

2009

2010

2011

2012

2013

2014

2015


Figure 4: Investor by category (years ending June 30)5 Catastrophe Fund

Institutional

Mutual Fund

Reinsurer

Hedge Fund

2% 5% 10%

6%

11%

9% 47%

46%

32%

32%

2015

2014


5

Aon Securities’ analysis of investor category includes only those transactions in which the firm participated

Aon Benfield

43

Figure 5: Investor by country/region (years ending June 30)6 U.S.

UK

Bermuda

Switzerland

Other

11%

13%

34% 26%

47%

28%

11%

7%

14%

9% 2014

2015 Source: Aon Securities Inc.

Figure 6: Historical performance of Aon ILS Indices Aon ILS Index

260%

Aon ILS BB Index

Aon ILS U.S. EQ

Aon ILS U.S. Hurricane

180%

100%

20%

-60% Jun 2005

Jun 2006

Jun 2007

Jun 2008

Jun 2009

Jun 2010

Jun 2011

Jun 2012


6

44

Aon Securities’ analysis of investor geographic attributes includes only those transactions in which the firm participated


Jun 2013

Jun 2014

Jun 2015

Figure 7: Aon All Bond ILS index versus financial benchmarks

260%

Aon All Bond ILS Index


ABS 3-5 Year, Fixed Rate Index

CMBS 3-5 Year, Fixed Rate Index

S&P 500

3-5 Year U.S. Treasury Notes Index

180%

100%

20%

-60% Jun 2005

Jun 2006

Jun 2007

Jun 2008

Jun 2009

Jun 2010

Jun 2011

Jun 2012

Jun 2013

Jun 2014

Jun 2015


Figure 8: Alternative market development Catastrophe bonds

80

Sidecar

ILW

Collateralized re and others 68

70 64

USD millions

60 50

50

44

40 28

30 22

20

17

22

24

19

10 0

2006

2007

2008

2009

2010

2011

2012

2013

2014

1H2015


Aon Benfield

45

Figure 9: Global reinsurer capital 800

Traditional capital

Alternative capital

Global reinsurer capital

700

USD billions

600 500

18%

6% 410

-17%

18%

385

400

470

540

11%

-3%

-2%

6%

7%

575

565

505

455

400

340

300 200

368

388

321

378

447

428

461

490

511

497

17

22

19

22

24

28

44

50

64

68

2006

2007

2008

2009

2010

2011

2012

2013

2014

1H2015

100 0

Source: Individual company reports, Aon Benfield Analytics, Aon Securities

Figure 10: ILW trade volume and U.S. ANP price movement Total U.S. trade volume

$80 billion ANP

$50 billion ANP

$30 billion ANP

150

1200

120

900 90 600 60

300

Price movement by quarter


1500

30

0 Q2 2011

Q2 2012

Q2 2013

Q2 2014

Q2 2015 Legend ANP — All Natural Perils

Source: The Global Re Specialty team of Aon U.K. Limited

46


Appendix II Property Catastrophe Bonds—Transaction Summary As of June 30, 2015 Source: Aon Securities Inc.

Aon Benfield

47

Summary of catastrophe bonds — December 1996 through June 2015 Issuance Date

Beneficiary

Dec-96

St Paul Re UK

Dec-96

St Paul Re UK*

Jun-97


Residential Reinsurance Limited

Jun-97


Oct-97

Series

Class

Size (thousands)

Perils

Trigger

Collateral

George Town Re, Ltd.

Worldwide All Perils incl. Marine & Aviation

Indemnity

TRS

$44,500

George Town Re, Ltd.

Worldwide All Perils incl. Marine & Aviation

Indemnity

TRS

$24,000

Aaa

AAA

Class A-1

US HU

Indemnity

TRS

$163,800

Aaa

AAA


Class A-2

US HU

Indemnity

TRS

$313,180

Ba2

BB

Swiss Reinsurance Company Ltd.

SR Earthquake Fund, Ltd.

Class A-1

US EQ

Industry Index

TRS

$42,000

Baa3

BBB-

Oct-97

Swiss Reinsurance Company Ltd.*


Class A-2

US EQ

Industry Index

TRS

$20,000

Baa3

BBB-

Oct-97



Class B

US EQ

Industry Index

TRS

$60,300

Ba1

BB

Oct-97



Class C

US EQ

Industry Index

TRS

$14,700

Ba3

B

Nov-97


Parametric Re, Ltd.

JP EQ

Parametric

TRS

$80,000

Ba2

Nov-97


Parametric Re, Ltd.

JP EQ

Parametric

TRS

$20,000

Baa3

Mar-98

Centre Solutions (Bermuda) Limited (Zurich Group)

Trinity Re, Ltd.

Class A-1

US HU

Indemnity

TRS

$10,467

Aaa

AAA

Mar-98


Trinity Re, Ltd.

Class A-2

US HU

Indemnity

TRS

$61,533

Ba3

BB

Jun-98



US HU

Indemnity

TRS

$450,000

Ba2

Jun-98

The Yasuda Fire and Marine Insurance Company Limited

Pacific Re, Ltd.

JP TY

Indemnity

TRS

$80,000

Ba3

BB-

Jul-98

United States Fidelity and Guaranty Company

Mosaic Re, Ltd.

Class A

US HU, EQ, ST

Indemnity

TRS

$24,000

Jul-98


Mosaic Re, Ltd.

Class B

US HU, EQ, ST

Indemnity

TRS

$21,000

Jul-98


Mosaic Re, Ltd.

US HU, EQ, ST

Indemnity

TRS

$9,000

Dec-98


Trinity Re 1999, Ltd.

Class A-1

US HU

Indemnity

TRS

$2,385

Aaa

AAA

Dec-98


Trinity Re 1999, Ltd.

Class A-2

US HU

Indemnity

TRS

$51,615

Ba3

BB

Feb-99


Mosaic Re II, Ltd.

Class A

US HU, EQ, ST

Indemnity

TRS

$25,000

Feb-99


Mosaic Re II, Ltd.

Class B

US HU, EQ, ST

Indemnity

TRS

$20,000

Mar-99

Kemper

Domestic, Inc.

US EQ

Indemnity

TRS

$80,000

Mar-99

Kemper*

Domestic, Inc.

US EQ

Indemnity

TRS

$20,000

Apr-99

Sorema S..A

Halyard Re B.V.

EU, JP EQ, TY

Indemnity

TRS

$17,000

May-99

Oriental Land Co., Ltd.

JP EQ

Parametric

TRS

$100,000

*Equity

48

Issuer


Concentric, Ltd.

Series 1999

Moody’s

S&P

BB

Ba2

BB+

Ba1

BB+

Fitch

BB

BB

Issuance Date

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

Ba2

S&P

Fitch

Jun-99



US HU

Indemnity

TRS

$200,000

Jun-99

Gerling-Konzern Globale RückversicherungsAktienfesellschaft

Juno Re, Ltd.

US HU

Indemnity

TRS

$80,000

Nov-99

American Re

Gold Eagle Capital Limited

Class A

US HU, EQ

Modeled Loss

TRS

$50,000

Baa3

BBB-

Nov-99

American Re


Class B

US HU, EQ

Modeled Loss

TRS

$126,600

Ba2

BB

Nov-99

American Re*


US HU, EQ

Modeled Loss

TRS

$5,500

Ba1

BB+

Nov-99

American Re*


US HU, EQ

Modeled Loss

TRS

$3,600

BB+

Nov-99

Gerling-Konzern Globale RückversicherungsAktienfesellschaft

Namazu Re, Ltd.

JP EQ

Modeled Loss

TRS

$100,000

BB

Mar-00

Lehman Re Ltd.

Seismic Limited

US EQ

Mar-00

Lehman Re Ltd.*

Seismic Limited

Mar-00

SCOR

Atlas Reinsurance p.l.c.

Class A

Mar-00

SCOR


Mar-00

SCOR


Apr-00

Sorema SA

May-00

State Farm Companies

May-00

BB

BB

Industry Index

TRS

$145,500

Industry Index

TRS

$4,500

EU Wind, CA/JP EQ

Indemnity

TRS

$70,000

BBB+

BBB+

Class B

EU Wind, CA/JP EQ

Indemnity

TRS

$30,000

BBB-

BBB-

Class C

EU Wind, CA/JP EQ

Indemnity

TRS

$100,000

B-

B-

EU/JP Wind, JP EQ

Indemnity

TRS

$17,000

Alpha Wind 2000-A Ltd.

US HU

Indemnity

TRS

$52,500

BB+

State Farm Companies*

Alpha Wind 2000-A Ltd.

US HU

Indemnity

TRS

$37,500

BB

Jun-00



US HU

Indemnity

TRS

$200,000

Ba2

Jul-00

Vesta Fire Insurance Corporation

NeHi, Inc.

US HU

Modeled Loss

TRS

$41,500

Ba3

Jul-00

Vesta Fire Insurance Corporation*

NeHi, Inc.

US HU

Modeled Loss

TRS

$8,500

Nov-00

Assurances Generales de France I.A.R.T.

Mediterranean Re p.l.c.

Class A

EU Wind, EQ

Modeled Loss

TRS

$41,000

Baa3

BBB+

BBB

Nov-00

Assurances Generales de France I.A.R.T.

Mediterranean Re p.l.c.

Class B

EU Wind, EQ

Modeled Loss

TRS

$88,000

Ba3

BB+

BB+

Dec-00

Munich Re

PRIME Capital CalQuake & EuroWind Ltd.

US EQ, EU Wind

Parametric Index

TRS

$129,000

Ba3

BB+

BB

Dec-00

Munich Re*

PRIME Capital CalQuake & EuroWind Ltd.

US EQ, EU Wind

Parametric Index

TRS

$6,000

Dec-00

Munich Re

PRIME Capital Hurricane Ltd.

US HU

Parametric Index

TRS

$159,000

Ba3

BB+

BB

Dec-00

Munich Re*

PRIME Capital Hurricane Ltd.

US HU

Parametric Index

TRS

$6,000

Feb-01


US EQ

Industry Index

TRS

$97,000

Ba2

BB+

Halyard Re B.V.

Western Capital Limited

Series 2000

Class B

Class B

Ba2

BB+

BB+

BB+

BB

*Equity

Aon Benfield

49

Issuance Date

Beneficiary

Series

Class

Size (thousands)

Perils

Trigger

Collateral

Western Capital Limited

US EQ

Industry Index

TRS

$3,000

Gold Eagle Capital 2001 Limited

US HU, EQ

Modeled Loss

TRS

$116,400

Halyard Re B.V.

EU Wind, JP EQ, TY

Indemnity

TRS

$17,000

Moody’s

S&P

Fitch

Feb-01


Mar-01

American Re

Apr-01

Sorema SA

May-01


SR Wind Ltd.

Class B-1

US HU, EU Wind

Parametric Index

TRS

$1,800

BB

BB

May-01


SR Wind Ltd.

Class B-2

US HU, EU Wind

Parametric Index

TRS

$1,800

BB

BB

May-01


SR Wind Ltd.

Class A-1

US HU, EU Wind

Parametric Index

TRS

$58,200

BB+

BB+

May-01


SR Wind Ltd.

Class A-2

US HU, EU Wind

Parametric Index

TRS

$58,200

BB+

BB+

Jun-01



US HU

Indemnity

TRS

$150,000

Ba2

BB+

Jun-01

Zurich Insurance Company*

Trinom Ltd.

US HU, EQ, EU Wind

Modeled Loss

TRS

$4,856

B2

B+

Jun-01

Zurich Insurance Company

Trinom Ltd.

Class A-1

US HU, EQ, EU Wind

Modeled Loss

TRS

$60,000

Ba2

BB

BB-

Jun-01

Zurich Insurance Company

Trinom Ltd.

Class A-2

US HU, EQ, EU Wind

Modeled Loss

TRS

$97,000

Ba1

BB+

BB

Dec-01

SCOR

Atlas Reinsurance II p.l.c.

Class A

EU Wind, CA/JP EQ

Parametric/ Parametric Index

TRS

$50,000

A3

A

Dec-01

SCOR

Atlas Reinsurance II p.l.c.

Class B

EU Wind, CA/JP EQ

Parametric/ Parametric Index

TRS

$100,000

Ba2

BB+

Dec-01

Lehman Re Ltd.

Redwood Capital I, Ltd.

US EQ

Industry Index

TRS

$160,050

Ba2

BB+

Dec-01

Lehman Re Ltd.*

Redwood Capital I, Ltd.

US EQ

Industry Index

TRS

$4,950

Mar-02

Lehman Re Ltd.

Redwood Capital II, Ltd

US EQ

Industry Index

TRS

$194,000

Baa3

BBB-

Mar-02

Lehman Re Ltd.*

Redwood Capital II, Ltd

US EQ

Industry Index

TRS

$6,000

Ba1

BBB-

Apr-02

Lloyd's Syndicate 33 (Hiscox) St. Agatha Re Ltd.

US EQ

Modeled Loss

Bank Deposit

$33,000

BB+

May-02

Nissay Dowa General Insurance Co., Ltd.

Fujiyama Ltd.

JP EQ

Parametric

TRS

$67,900

BB+

May-02

Nissay Dowa General Insurance Co., Ltd.*

Fujiyama Ltd.

JP EQ

Parametric

TRS

$2,100

BB

May-02



US HU

Indemnity

TRS

$125,000

Ba3

BB+

Jun-02


PIONEER 2002 Ltd.

Series 2002-1

Class A

US HU

Parametric Index

TRS

$85,000

Ba3

BB+

Jun-02


PIONEER 2002 Ltd.

Series 2002-1

Class B

EU Wind

Parametric Index

TRS

$50,000

Ba3

BB+

Jun-02


PIONEER 2002 Ltd.

Series 2002-1

Class C

US EQ

Parametric Index

TRS

$30,000

Ba3

BB+

Jun-02


PIONEER 2002 Ltd.

Series 2002-1

Class D

US EQ

Parametric Index

TRS

$40,000

Baa3

BBB-

*Equity

50

Issuer


Ba2

BB+

Issuance Date

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

Jun-02


PIONEER 2002 Ltd.

Series 2002-1

Class E

JP EQ

Parametric Index

TRS

$25,000

Ba3

BB+

Jun-02


PIONEER 2002 Ltd.

Series 2002-1

Class F

US/EU Wind, US/JP EQ

Parametric Index

TRS

$25,000

Ba3

BB+

Sep-02


PIONEER 2002 Ltd.

Series 2002-2

Class B

EU Wind

Parametric Index

TRS

$5,000

Ba3

BB+

Sep-02


PIONEER 2002 Ltd.

Series 2002-2

Class C

US EQ

Parametric Index

TRS

$20,500

Ba3

BB+

Sep-02


PIONEER 2002 Ltd.

Series 2002-2

Class D

US EQ

Parametric Index

TRS

$1,750

Baa3

BBB-

Dec-02


PIONEER 2002 Ltd.

Series 2002-3

Class A

US HU

Parametric Index

TRS

$8,500

Ba3

BB+

Dec-02


PIONEER 2002 Ltd.

Series 2002-3

Class B

EU Wind

Parametric Index

TRS

$21,000

Ba3

BB+

Dec-02


PIONEER 2002 Ltd.

Series 2002-3

Class C

US EQ

Parametric Index

TRS

$15,700

Ba3

BB+

Dec-02


PIONEER 2002 Ltd.

Series 2002-3

Class D

US EQ

Parametric Index

TRS

$25,500

Baa3

BBB-

Dec-02


PIONEER 2002 Ltd.

Series 2002-3

Class E

JP EQ

Parametric Index

TRS

$30,550

Ba3

BB+

Dec-02


PIONEER 2002 Ltd.

Series 2002-3

Class F


Parametric Index

TRS

$3,000

Ba3

BB+

Dec-02

Vivendi Universal, S.A.

Studio Re Ltd.

US EQ

Parametric Index

TRS

$150,000

Ba2

BB+

Dec-02

Vivendi Universal, S.A.*

Studio Re Ltd.

US EQ

Parametric Index

TRS

$25,000

B1

BB

Mar-03


PIONEER 2002 Ltd.

Series 2003-1

Class A

US HU

Parametric Index

TRS

$6,500

Ba3

BB+

Mar-03


PIONEER 2002 Ltd.

Series 2003-1

Class B

EU Wind

Parametric Index

TRS

$8,000

Ba3

BB+

Mar-03


PIONEER 2002 Ltd.

Series 2003-1

Class C

US EQ

Parametric Index

TRS

$6,500

Ba3

BB+

Mar-03


PIONEER 2002 Ltd.

Series 2003-1

Class D

US EQ

Parametric Index

TRS

$5,500

Baa3

BBB-

Mar-03


PIONEER 2002 Ltd.

Series 2003-1

Class E

JP EQ

Parametric Index

TRS

$8,000

Ba3

BB+

Mar-03


PIONEER 2002 Ltd.

Series 2003-1

Class F


Parametric Index

TRS

$8,140

Ba3

BB+

May-03


US HU, EQ

Indemnity

TRS

$160,000

Ba2

BB+

Jun-03


PIONEER 2002 Ltd.

Series 2003-2

Class A

US HU

Parametric Index

TRS

$9,750

Ba3

BB+

Jun-03


PIONEER 2002 Ltd.

Series 2003-2

Class B

EU Wind

Parametric Index

TRS

$12,250

Ba3

BB+

Jun-03


PIONEER 2002 Ltd.

Series 2003-2

Class C

US EQ

Parametric Index

TRS

$7,250

Ba3

BB+

Jun-03


PIONEER 2002 Ltd.

Series 2003-2

Class D

US EQ

Parametric Index

TRS

$2,600

Baa3

BBB-

Jun-03

Zenkyoren

Phoenix Quake Ltd.

JP EQ

Parametric Index

TRS

$192,500

Baa3

BBB+

Jun-03

Zenkyoren

Phoenix Quake Wind II Ltd.

JP TY, EQ

Parametric Index

TRS

$85,000

Ba1

BBB-


Fitch

*Equity

Aon Benfield

51

52

Issuance Date

Beneficiary

Issuer

Size (thousands)

Moody’s

Jun-03

Zenkyoren

Phoenix Quake Wind Ltd.

TRS

$192,500

Baa3

Jul-03


Arbor I Ltd.

Parametric Index

TRS

$95,000

Jul-03


US/EU Wind, CA/JP EQ

Parametric Index

TRS

$26,500

A1

A+

Jul-03

Series 1

US HU

Parametric Index

TRS

$22,350

Ba3

BB+

Oak Capital Ltd.

Series 1

EU Wind

Parametric Index

TRS

$23,600

Ba3

BB+


Sequoia Capital Ltd.

Series 1

US EQ

Parametric Index

TRS

$22,500

Ba3

BB+

Jul-03


Sakura Capital Ltd.

Series 1

JP EQ

Parametric Index

TRS

$14,700

Ba3

BB+

Aug-03

Central Reinsurance Corporation (for TREIP)

Taiwan EQ

Indemnity

TRS

$100,000

NR

Sep-03


Arbor I Ltd.

Series 2


Parametric Index

TRS

$60,000

B

Dec-03


Palm Capital Ltd.

Series 2

US HU

Parametric Index

TRS

$19,000

Dec-03


Arbor I Ltd.

Series 3


Parametric Index

TRS

$8,850

Dec-03


PIONEER 2002 Ltd.

US EQ

Parametric Index

TRS

$51,000

Baa3

BBB-

Dec-03

Electricite de France

Pylon Ltd.

Class A

EU Wind

Parametric Index

TRS

€ 70,000

A2

BBB+

Dec-03

Electricite de France

Pylon Ltd.

Class B

EU Wind

Parametric Index

TRS

€ 120,000

Ba1

BB+

Dec-03


Redwood Capital III, Ltd.

US EQ

Industry Index

TRS

$150,000

Ba1

BB+

Dec-03


Redwood Capital IV, Ltd.

US EQ

Industry Index

TRS

$200,000

Baa3

BBB-

Mar-04


Oak Capital Ltd.

Series 2

EU Wind

Parametric Index

TRS

$24,000

Ba3

BB+

Mar-04



Series 2

US EQ

Parametric Index

TRS

$11,500

Ba3

BB+

Mar-04


Arbor Ltd.

Series 4


Parametric Index

TRS

$21,000

B

May-04



Class A

US HU, EQ

Indemnity

TRS

$127,500

BB

May-04



Class B

US HU, EQ

Indemnity

TRS

$100,000

B

Jun-04

Converium Ltd.


Modeled Loss

Bank Deposit

$100,000

BB+

Jun-04


Arbor Ltd.


Parametric Index

TRS

$18,000

B

Jun-04


Gi Capital Ltd.

JP EQ

Parametric Index

TRS

$125,000

BB+

Sep-04


Oak Capital Ltd.

Series 3

EU Wind

Parametric Index

TRS

$10,500

Ba3

BB+

Sep-04



Series 3

US EQ

Parametric Index

TRS

$11,000

Ba3

BB+

Perils

Trigger

Collateral

JP TY, EQ

Parametric Index

Series 1


Arbor II Ltd.

Series 1


Palm Capital Ltd.

Jul-03


Jul-03


Series

Class

Formosa Re Ltd.

Helix 04 Limited Series 5

S&P BBB+ B

Ba3

BB+ B

Fitch

Issuance Date

Beneficiary

Issuer

Series

Arbor Ltd.

Series 6

Class

Size (thousands)

Perils

Trigger

Collateral


Parametric Index

TRS

$31,800

Moody’s

S&P

Fitch

Sep-04


Nov-04

Hartford Fire Insurance Company

Foundation Re Ltd.

Series 2004-I

Class A

US HU

Industry Index

TRS

$180,000

BB+

Nov-04


Foundation Re Ltd.

Series 2004-I

Class B

US HU, EQ

Industry Index

TRS

$67,500

BBB+

Dec-04


Arbor I Ltd.

Series 7


Parametric Index

TRS

$15,000

B

Dec-04


Redwood Capital V, Ltd.

US EQ

Industry Index

TRS

$150,000

Ba2

BB+

Dec-04


Redwood Capital VI, Ltd.

US EQ

Industry Index

TRS

$150,000

Ba2

BB+

Mar-05


Arbor I Ltd.


Parametric Index

TRS

$20,000

B

May-05



Class A

US HU, EQ

Indemnity

TRS

$91,000

BB

May-05



Class B

US HU, EQ

Indemnity

TRS

$85,000

B

Jun-05

Factory Mutual Insurance Company

US EQ

Parametric

TRS

$300,000

BB+

Jun-05



Parametric Index

TRS

$25,000

B

Jul-05

Zurich American Insurance Company

US HU, EQ

Indemnity

TRS

$190,000

BB+

Nov-05

PXRE Reinsurance Ltd.

Atlantic & Western Re Limited

Class A

US/EU Wind

Modeled Loss

TRS

$100,000

BB+

BB

Nov-05


Atlantic & Western Re Limited

Class B

US/EU Wind, U.S. HU

Modeled Loss

TRS

$200,000

B+

B

Nov-05

Munich Re

EU Wind

Parametric Index

TRS

€ 110,000

BB+

Dec-05



Parametric Index

TRS

$18,000

B

Dec-05


Atlantic & Western Re II Limited

Class A

US/EU Wind, U.S. EQ

Modeled Loss

TRS

$125,000

BB+

Dec-05


Atlantic & Western Re II Limited

Class B

US/EU Wind, U.S. EQ

Modeled Loss

TRS

$125,000

BB+

Dec-05

Montpelier Reinsurance Ltd.

Champlain Limited

Class A

US/JP EQ

Modeled Loss

TRS

$75,000

B

B-

Dec-05

Montpelier Reinsurance Ltd.

Champlain Limited

Class B

US HU, EQ

Modeled Loss

TRS

$15,000

B+

B-

Jan-06


Australis Ltd.

AU CY, EQ

Parametric Index

TRS

$100,000

BB

Feb-06


Redwood Capital VII, Ltd.

US EQ

Industry Index

TRS

$160,000

BB+

Feb-06


Redwood Capital VIII, Ltd.

US EQ

Industry Index

TRS

$65,000

BB+

Feb-06


Class D

US HU, EQ

Industry Index

TRS

$105,000

BB

May-06

The Fund for Natural Disasters

Class A

Mexico EQ

Parametric

TRS

$150,000

BB+

Series 8

Cascadia Limited Arbor I Ltd.

Series 9

KAMP Re 2005 Ltd.

Aiolos Ltd. Arbor I Ltd.

Foundation Re Ltd. CAT-Mex Ltd.

Series 10

Series 1

Series 2006-I

B

BB

Aon Benfield

53

Issuance Date

54

Beneficiary

Issuer

Series

Size (thousands)

Class

Perils

Trigger

Collateral

Moody’s

S&P

CAT-Mex Ltd.

Class B

Mexico EQ

Parametric

TRS

$10,000

BB+

Calabash Re Ltd.

Series Class A-1 2006-I

US HU

Industry Index

TRS

$100,000

BB

May-06


May-06

ACE American Insurance Company

May-06



Class A

US HU, EQ

Indemnity

TRS

$47,500

B

May-06



Class C

US HU, EQ

Indemnity

TRS

$75,000

BB+

Jun-06


Successor Hurricane Industry Ltd.

Series 2

Class D

US HU

Industry Index

TRS

$10,250

B

Jun-06



Series 2

Class E

US HU

Industry Index

TRS

$35,000

Jun-06


Successor Japan Quake Ltd.

Series 2

Class C

JP EQ

Modeled Loss

TRS

$3,000

Jun-06


Successor Euro Wind Ltd.

Series 2

Class A

EU Wind

Parametric Index

TRS

$3,000

Ba3

BB

Jun-06



Series 2

Class C

EU Wind

Parametric Index

TRS

$3,000

B3

B

Jun-06



Series 1

Class B

US HU

Industry Index

TRS

$14,000

B1

BB-

Jun-06



Series 1

Class C

US HU

Industry Index

TRS

$7,250

B2

B

Jun-06



Series 1

Class D

US HU

Industry Index

TRS

$34,250

Jun-06



Series 1

Class E

US HU

Industry Index

TRS

$5,000

Jun-06



Series 1

Class F

US HU

Industry Index

TRS

$54,000

B2

B

Jun-06


Successor Hurricane Modeled Ltd.

Series 1

Class B

US HU

Modeled Loss

TRS

$42,250

B1

BB-

Jun-06


Successor Cal Quake Parametric Ltd.

Series 1

Class A

US EQ

Parametric Index

TRS

$47,500

Ba3

BB

Jun-06



Series 1

Class A

JP EQ

Modeled Loss

TRS

$103,470

BB

Jun-06



Series 1

Class B

JP EQ

Modeled Loss

TRS

$26,250

BB-

Jun-06



Series 2

Class C

JP EQ

Modeled Loss

TRS

$70,750

B

Jun-06



Series 1

Class A

EU Wind

Parametric Index

TRS

$97,130

Ba3

BB

Jun-06



Series 1

Class B

EU Wind

Parametric Index

TRS

$18,500

B1

BB-

Jun-06



Series 1

Class C

EU Wind

Parametric Index

TRS

$110,750

B3

B

Jun-06


Successor II Ltd.

Series 1

Class A


Modeled Loss, Parametric Index

TRS

$73,200

B3

B


B

B

Fitch

Issuance Date

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

Jun-06


Successor II Ltd.

Series 1

Class E



TRS

$154,250

Jun-06


Successor III Ltd.

Series 1

Class A

US/EU Wind, JP EQ


TRS

$7,200

Jun-06


Successor IV Ltd.

Series 1

Class A



TRS

$30,000

B

Jun-06

Munich Re

Carillon Ltd.

Series 1 Class A-2

US HU

Industry Index

TRS

$23,500

B+

Jun-06

Munich Re

Carillon Ltd.

Series 1

Class B

US HU

Industry Index

TRS

$10,000

B

Jun-06

Munich Re

Carillon Ltd.

Series 1 Class A-1

US HU

Industry Index

TRS

$51,000

B+

Jun-06

Liberty Mutual Insurance Company

Series 2006-1

US HU

Industry Index

TRS

$200,000

BB+

Jun-06

Balboa Insurance Group

US HU

Indemnity

Bank Deposit

$50,000

BB+

Jun-06

Dominion Resources

US HU

Parametric Index

TRS

$50,000

NR

Jul-06

Hannover Re

EU Wind

Parametric Index

TRS

$150,000

BB

Aug-06

Endurance Specialty Insurance Company

Shackleton Re Limited

Class A

US EQ

Industry Index

TRS

$125,000

Ba3

BB

Aug-06



Class B

US HU

Industry Index

TRS

$60,000

Ba3

BB

Aug-06



Class C

US HU, EQ

Industry Index

TRS

$50,000

Ba2

BB+

Aug-06


Aug-06


Aug-06

Factory Mutual Insurance Company

Cascadia II Limited

Nov-06


Foundation Re II Ltd.

Series 2006-I

Nov-06


Foundation Re II Ltd.

Nov-06


Nov-06


Dec-06

Mystic Re Ltd.

Class A

VASCO Re 2006 Ltd. DREWCAT Capital, Ltd.

Class A

Eurus Ltd.

Fhu-Jin Ltd.

Series 1

Class B

JP TY

Parametric Index

TRS

$200,000


Series 3

Class E

US HU

Industry Index

TRS

$50,000

US EQ

Parametric

Bank Deposit

$300,000

Class G

US, HU, EQ, ST

Industry Index

TRS

$67,500

Series 2006-I

Class A

US HU

Industry Index

TRS

$180,000

BB+

Mystic Re Ltd.

Series 2006-2

Class A

US HU

Industry Index

TRS

$200,000

BB+

Mystic Re Ltd.

Series 2006-2

Class B

US HU

Industry Index

TRS

$125,000

BB


Successor I Ltd.

Series 1

Class B

NA/EU W, CA/JP EQ

Industry Index, Modeled Loss, Parametric Index

TRS

$4,000

Dec-06



Series 4

Class E

US HU

Industry Index

TRS

$4,000

Dec-06


Successor I Ltd.

Series 2

Class B

NA/EU W, CA/JP EQ

Industry Index, Modeled Loss, Parametric Index

TRS

$24,500

Dec-06



Series 5

Class E

US HU

Industry Index

TRS

$26,000

Fitch

BB+

BB+

BB+

B

Aon Benfield

55

Issuance Date

56

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

Dec-06



Series 3

Class A

EU Wind

Parametric Index

TRS

$118,000

Ba3

BB

Dec-06



Series 3

Class C

EU Wind

Parametric Index

TRS

$15,000

B3

B

Dec-06

Zurich American Insurance Company

Lakeside Re Ltd.

US EQ

Indemnity

Bank Deposit

$190,000

BB+

Dec-06

SCOR

Atlas Reinsurance III p.l.c.

JP EQ, EU Wind

Modeled Loss

TRS

€120,000

BB+

Dec-06


Redwood Capital IX Ltd.

Series 1

Class A

US EQ

Parametric Index

TRS

$125,000

Ba2

BB+

Dec-06



Series 1

Class B

US EQ

Parametric Index

TRS

$125,000

Ba2

BB+

Dec-06



Series 1

Class C

US EQ

Parametric Index

TRS

$18,000

Baa3

BBB-

Dec-06



Series 1

Class D

US EQ

Parametric Index

TRS

$20,000

Ba3

BB

Dec-06



Series 1

Class E

US EQ

Parametric Index

TRS

$12,000

B3

B

Jan-07


Calabash Re II Ltd.

Series Class A-1 2006-I

US HU

Modeled Loss

TRS

$100,000

BB

Jan-07


Calabash Re II Ltd.

Series Class D-1 2006-I

US EQ

Modeled Loss

TRS

$50,000

B+

Jan-07


Calabash Re II Ltd.

Series 2006-I

US HU, EQ

Modeled Loss

TRS

$100,000

BB

Mar-07

Swiss Re

Australis Ltd.

Series 2

AU CY, EQ

Parametric Index

TRS

$50,000

BB

Apr-07

Allianz Global Corporate & Specialty AG

Blue Wings Ltd.

Series 1

Class A

US EQ, U.K. Flood


TRS

$150,000

BB+

Apr-07

Aspen Insurance Limited

Ajax Re Limited

Series 1

Class A

US EQ

Industry Index

TRS

$100,000

BB

Class A

US HU

Indemnity

TRS

$135,000

BB+

Class E-1

Apr-07

Chubb Group

East Lane Re Ltd.

Series 2007-I

Apr-07

Chubb Group

East Lane Re Ltd.

Series 2007-I

Class B

US HU

Indemnity

TRS

$115,000

BB+

May-07

Munich Re

May-07


May-07


May-07

Carillon Ltd.

Series 2

Class E

US HU

Industry Index

TRS

$150,000

B

Longpoint Re Ltd.

Series 2007-1

Class A

US HU

Industry Index

TRS

$500,000

BB+

Successor II Ltd.

Series 2

Class A

NA/EU W, CA/JP EQ


TRS

$100,000

B

Mitsui Sumitomo Insurance Co., Ltd.

AKIBARE Ltd.

Series 1

Class A

JP TY

Parametric Index

TRS

$90,000

BB+

May-07

Mitsui Sumitomo Insurance Co., Ltd.

AKIBARE Ltd.

Series 1

Class B

JP TY

Parametric Index

TRS

$30,000

BB+

May-07


MedQuake Ltd.

Series 1

Class A

EU EQ

Parametric Index

TRS

$50,000

BB-

May-07


MedQuake Ltd.

Series 1

Class B

EU EQ

Parametric Index

TRS

$50,000

B

May-07


Mystic Re II Ltd.

Series 2007-1

US HU

Industry Index

TRS

$150,000

B+

May-07



Series 2007-I

US HU, EQ

Indemnity

TRS

$145,000

BB


Class 1

Fitch

Issuance Date

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

Fitch

May-07



Series 2007-I

Class 2

US HU, EQ

Indemnity

TRS

$125,000

B

May-07



Series 2007-I

Class 3

US HU, EQ

Indemnity

TRS

$75,000

B

May-07



Series 2007-I

Class 4

US HU, EQ

Indemnity

TRS

$155,000

BB+

May-07



Series 2007-I

Class 5

US HU, EQ

Indemnity

TRS

$100,000

BB+

Jun-07

Glacier Reinsurance AG

Nelson Re Ltd.

Series 2007-I

Class A

US/EU W, U.S. Q

Industry Index, Modeled Loss

TRS

$75,000

Jun-07

Allstate Insurance Company

Willow Re Ltd.

Series 2007-1

Class B

US HU

Industry Index

TRS

$250,000

Jun-07


Spinnaker Capital Ltd.

Series 1 2007

US HU

Industry Index

TRS

$200,000

B1

Jun-07

Brit Insurance Limited

Fremantle Limited

Series 2007-1

Class A

US/EU/JP Wind, US/JP EQ

Industry Index

TRS

$60,000

Aa1

AAA

Jun-07


Fremantle Limited

Series 2007-1

Class B


Industry Index

TRS

$60,000

A3

BBB+

Jun-07


Fremantle Limited

Series 2007-1

Class C


Industry Index

TRS

$80,000

Ba2

BB-

Jun-07



Series 2 2007

US HU

Industry Index

TRS

$130,200

Ba2

Jun-07


FUSION 2007 Ltd.

Class A

JP TY, Mexico EQ

Parametric Index

TRS

$30,000

B

Jun-07


FUSION 2007 Ltd.

Class B

JP TY, Mexico EQ

Parametric Index

TRS

$80,000

B

Jun-07


FUSION 2007 Ltd.

Class C

Mexico EQ

Parametric Index

TRS

$30,000

BB+

Jul-07

State Farm Mutual Automobile Insurance Company

Merna Reinsurance Ltd.

Tranche A

NA HU, EQ, ST, WS, WF

Indemnity

TRS

$350,000

Aa2

AAA

Jul-07



Tranche B


Indemnity

TRS

$666,600

A2

AA+

Jul-07



Tranche C


Indemnity

TRS

$164,000

Baa2

A-

Jul-07

Arrow Capital Reinsurance Company, Limited

Javelin Re Ltd.

Class A

Worldwide All Perils

Indemnity

TRS

$94,500

A-

Jul-07

Arrow Capital Reinsurance Company, Limited

Javelin Re Ltd.

Class B

Worldwide All Perils

Indemnity

TRS

$30,750

BBB-

Jul-07


US HU

Industry Index

TRS

$50,000

NR

Oct-07

East Japan Railway Company

MIDORI Ltd.

JP EQ

Parametric

TRS

$260,000

BB+

Nov-07

Allianz Argos 14 GmbH

Blue Fin Ltd.

Series 1

Class A

EU Wind

Parametric Index

TRS

€155,000

BB+

Nov-07


Blue Fin Ltd.

Series 1

Class B

EU Wind

Parametric Index

TRS

$65,000

BB+

Nov-07

SCOR Global P&C SE

EU Wind, JP EQ

Modeled Loss

TRS

€160,000

B

Dec-07

Catlin Group

US EQ

Industry Index

Bank Deposit

$87,500


Series 3 2007

Atlas Reinsurance IV Limited Newton Re Limited

Series 2007-1

Class A

B BB+

BB+

Aon Benfield

57

58

Issuance Date

Beneficiary

Dec-07

Catlin Group

Dec-07


Dec-07

Size (thousands)

Issuer

Series

Class

Perils

Trigger

Collateral

Moody’s

Newton Re Limited

Series 2007-1

Class B

US HU

Industry Index

Bank Deposit

$137,500

GlobeCat Ltd.

Series Class A-1 LAQ

Latin America EQ

Modeled Loss

TRS

$25,000

Ba3


GlobeCat Ltd.

Series Class A-1 USW

US HU

Industry Index

TRS

$40,000

B3

Dec-07


GlobeCat Ltd.

Series Class A-1 CAQ

US EQ

Industry Index

TRS

$20,000

B1

Dec-07

Groupama S.A.

Dec-07

S&P BB+

Green Valley Ltd.

Series 1

Class A

EU Wind

Parametric Index

TRS

€200,000

BB+



Series 6

Class C

US HU

Industry Index

TRS

$30,000

B2

Dec-07



Series 6

Class D

US HU

Industry Index

TRS

$30,000

Dec-07


Successor II Ltd.

Series 3

Class C


Parametric Index

TRS

$50,000

Dec-07


Successor II Ltd.

Series 3

Class E


Parametric Index

TRS

$50,000

Dec-07


Redwood Capital X Ltd.

Series 1

Class A

US EQ

Parametric Index

TRS

$25,000

Baa3

Dec-07



Series 1

Class B

US EQ

Parametric Index

TRS

$227,700

Ba2

Dec-07



Series 1

Class C

US EQ

Parametric Index

TRS

$50,200

Ba3

Dec-07



Series 2

Class D

US EQ

Industry Index

TRS

$130,500

Ba3

Dec-07



Series 2

Class E

US EQ

Industry Index

TRS

$45,200

B2

Dec-07



Series 2

Class F

US EQ

Industry Index

TRS

$20,000

NR

Feb-08

Catlin Group

Newton Re Limited

Series 2008-1

Class A


Indemnity

TRS

$150,000

BB

Mar-08

Munich Re

Queen Street Ltd.

Series 1

Class A

EU Wind

Parametric Index

TRS

€70,000

BB+

Mar-08

Munich Re

Queen Street Ltd.

Series 1

Class B

EU Wind

Parametric Index

TRS

€100,000

B

Mar-08

Chubb Group

East Lane Re II Ltd.

Series 2008-I

Class A

Northeast U.S. All Natural Perils

Indemnity

TRS

$75,000

BB

Mar-08

Chubb Group


Series 2008-I

Class B

Northeast U.S. All Natural Perils

Indemnity

TRS

$70,000

BB

Mar-08

Chubb Group


Series 2008-I

Class C

NA All Natural Perils

Indemnity

TRS

$55,000

B-

May-08

Zenkyoren

Muteki Ltd.

Series 2008-1

Class A

JP EQ

Parametric Index

TRS

$300,000

Ba2

May-08

HomeWise Preferred Insurance Company and HomeWise Insurance Company

Mangrove Re Ltd.

Series 2008-1

Class A

US HU

Indemnity

TRS

$150,000

Ba2

May-08

HomeWise Preferred Insurance Company and HomeWise Insurance Company

Mangrove Re Ltd.

Series 2008-1

Class B

US HU

Indemnity

TRS

$60,000

B1

May-08



Series 2008-I

Class 1

US HU, EQ

Indemnity

TRS

$125,000


B

B

BB

Fitch

Issuance Date

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

May-08



Series 2008-I

Class 2

US HU, EQ

Indemnity

TRS

$125,000

B

May-08



Series 2008-I

Class 4

US (HU, EQ, ST, WS, WF)

Indemnity

TRS

$100,000

BB+

May-08

Flagstone Reinsurance Limited and Flagstone Reassurance Suisse SA

Valais Re Ltd.

Series 2008-1

Class A


Indemnity

TRS

$64,000

Ba2

May-08

Flagstone Reinsurance Limited and Flagstone Reassurance Suisse SA

Valais Re Ltd.

Series 2008-1

Class C


Indemnity

TRS

$40,000

B3

Jun-08


Nelson Re Ltd.

Series 2008-I

Class G

US HU, EQ

Indemnity

TRS

$67,500

B3

Jun-08


Nelson Re Ltd.

Series 2008-I

Class H

EU Wind

Indemnity

TRS

$45,000

B3

Jun-08


Nelson Re Ltd.

Series 2008-I

Class I

EU Wind

Indemnity

TRS

$67,500

B1

Jun-08


Willow Re Ltd.

Series 2008-1

Class D

US HU

Industry Index

TRS

$250,000

BB+

Jun-08

Nationwide Mutual Insurance Company

Caelus Re Limited

Series 2008-1

Class A

US HU, EQ

Indemnity

TRS

$250,000

BB+

Jun-08


Vega Capital Ltd.

Series 2008-I

Class A


Parametric Index

TRS

$21,000

A3

A-

Jun-08


Vega Capital Ltd.

Series 2008-I

Class B


Parametric Index

TRS

$22,500

Baa2

BBB

Jun-08


Vega Capital Ltd.

Series 2008-I

Class C


Parametric Index

TRS

$63,900

Ba3

Jun-08


Vega Capital Ltd.

Series 2008-I

Class D


Parametric Index

TRS

$42,600

Jul-08

Allianz Risk Transfer (Bermuda) Limited

Blue Coast Ltd.

Series 2008-1

Class A

US HU

Industry Index

TRS

$70,000

BB-

Jul-08


Blue Coast Ltd.

Series 2008-1

Class B

US HU

Industry Index

TRS

$30,000

B+

Jul-08


Blue Coast Ltd.

Series 2008-1

Class C

US HU

Industry Index

TRS

$20,000

B-

Aug-08

Platinum Underwriters Bermuda Ltd.

Topiary Capital Limited

Series 2008-1

Class A

US/EU W, US/JP EQ

Industry Index

TRS

$200,000

BB+

Feb-09

SCOR Global P&C SE

Atlas V Capital Limited

Series 1

US HU, EQ

Industry Index

TRS

$50,000

B+

Feb-09

SCOR Global P&C SE


Series 2

US HU, EQ

Industry Index

TRS

$100,000

B+

Feb-09

SCOR Global P&C SE


Series 3

US HU, EQ

Industry Index

TRS

$50,000

B

Mar-09

Chubb Group

East Lane Re III Ltd.

Series 2009-I

US HU

Indemnity

TRS

$150,000

BB

Mar-09


Mystic Re II Ltd.

Series 2009-I

US HU, EQ

Industry Index

TRS

$225,000

BB

Blue Fin Ltd.

Series 2

US HU, EQ

Modeled Loss

MTN

$180,000

BB-

MMF

$60,000

Apr-09


Apr-09


May-09 May-09

Class A

Class A

Successor II Ltd.

Series 4

Class F

US HU, EQ

Parametric Index

Assurant, Inc.

Ibis Re Ltd.

Series 2009-1

Class A

US HU

Industry Index

TRS

$75,000

BB

Assurant, Inc.

Ibis Re Ltd.

Series 2009-1

Class B

US HU

Industry Index

TRS

$75,000

BB-

Fitch

Aon Benfield

59

Issuance Date

60

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

May-09



Series 2009-I

Class 1

US HU, EQ

Indemnity

MMF

$70,000

BB-

May-09



Series 2009-I

Class 2

US HU, EQ

Indemnity

MMF

$60,000

B-

May-09



Series 2009-I

Class 4

US (HU, EQ, ST, WS, WF)

Indemnity

MMF

$120,000

BB-

Jun-09

Munich Re

EU Wind, EQ

Parametric Index, Modeled Loss

MTN

€50,000

Jun-09


Calabash Re III Ltd.

Series 2009-I

Class A

US HU, EQ

Modeled Loss

MTN

$86,000

BB-

Jun-09


Calabash Re III Ltd.

Series 2009-I

Class B

US EQ

Modeled Loss

MTN

$14,000

BB+

Jul-09

North Carolina JUA/IUA

Parkton Re Ltd.

Series 2009-1

NC Wind

Indemnity

MMF

$200,000

B+

Jul-09

Hannover Re

Eurus II Ltd.

Series 2009-1

Class A

EU Wind

Parametric Index

TPR

€150,000

BB

Oct-09


MultiCat Mexico 2009 Limited

Series 2009-I

Class A

Mex EQ

Parametric

MMF

$140,000

B

Oct-09



Series 2009-I

Class B

Mex, HU Pacific

Parametric

MMF

$50,000

B

Oct-09



Series 2009-I

Class C

Mex, HU Pacific

Parametric

MMF

$50,000

B

Oct-09



Series 2009-I

Class D

Mex, HU Atlantic

Parametric

MMF

$50,000

BB-

Nov-09

Flagstone Reassurance Suisse SA

Montana Re Ltd.

Series 2009-1

Class A

US HU, EQ

Industry Index

TPR

$75,000

B-

Nov-09


Montana Re Ltd.

Series 2009-1

Class B

US HU

Industry Index

TPR

$100,000

BB-

Dec-09


Successor X Ltd.

Series Class I-S1 2009-1

US HU, EQ, EU Wind

Industry Index, Parametric Index

MMF

$50,000

Dec-09


Successor X Ltd.

Series 2009-1

Class I-U1

US HU, EQ


MMF

$50,000

Dec-09


Successor X Ltd.

Series 2009-1

Class I-X1

US HU, EQ


MMF

$50,000

Dec-09

SCOR Global P&C SE

Atlas VI Capital Limited

Series 2009-1

Class A

EU Wind, JP EQ

Parametric Index

Repo

€75,000

BB-

Dec-09


Longpoint Re II Ltd.

Series 2009-1

Class A

US HU

Industry Index

MMF

$250,000

BB+

Dec-09


Longpoint Re II Ltd.

Series 2009-1

Class B

US HU

Industry Index

MMF

$250,000

BB+

Dec-09

Zurich American Insurance Company, Zurich Insurance Company Ltd

CA EQ

Indemnity

MMF

$225,000

BB-

Dec-09


Jan-10


Mar-10



Ianus Capital Ltd.

Lakeside Re II Ltd.

B2

B-

Redwood Capital XI Ltd.

Series 2009-1

Class A

CA EQ

Industry Index

MMF

$150,000

Foundation Re III Ltd.

Series 2010-1

Class A

US HU

Industry Index

MMF

$180,000

BB+

Successor X Ltd.

Series 2010-1

Class II-CN3

US HU, EU Wind


MMF

$45,000

B-

B1

Fitch

Issuance Date

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

Mar-10


Successor X Ltd.

Series 2010-1

Class II-CL3

US HU, EU Wind


MMF

$35,000

Mar-10


Successor X Ltd.

Series 2010-1

Class II-BY3

US HU, EQ EU Wind, JP EQ


MMF

$40,000

Apr-10


US EQ

Indemnity

MMF

$350,000

BB+

Apr-10

Assurant, Inc.

Ibis Re Ltd.

Series 2010-1

Class A

US HU

Industry Index

MMF

$90,000

BB

Apr-10

Assurant, Inc.

Ibis Re Ltd.

Series 2010-1

Class B

US HU

Industry Index

MMF

$60,000

B+

May-10


Johnston Re Ltd.

Series 2010-1

Class A

US HU

Indemnity

MMF

$200,000

BB-

May-10


Johnston Re Ltd.

Series 2010-1

Class B

US HU

Indemnity

MMF

$105,000

BB-

May-10

National Union Fire Insurance Company of Pittsburgh

Lodestone Re Ltd.

Series 2010-1

Class A

US HU, EQ

Industry Index

MMF

$175,000

BB+

May-10


Lodestone Re Ltd.

Series 2010-1

Class B

US HU, EQ

Industry Index

MMF

$250,000

BB

May-10

Munich Re

EOS Wind Limited

Class A

US HU

Industry Index

MMF

$50,000

Ba3

May-10

Munich Re

EOS Wind Limited

Class B

US HU, EU Wind


MMF

$30,000

Ba3

May-10


May-10 May-10

Merna Reinsurance II Ltd.

Caelus Re II Limited

Series 2010-1

Class A

US HU, EQ

Indemnity

MMF

$185,000

BB+


Blue Fin Ltd.

Series 3

Class A

US HU, EQ

Modeled Loss

MMF

$90,000

B-


Blue Fin Ltd.

Series 3

Class B

US HU, EQ

Modeled Loss

MMF

$60,000

BB

Series 2010-I

Class 1

US HU, EQ, ST, WS, WF

Indemnity

MMF

$162,500

BB

May-10



May-10



Series 2010-I

Class 2


Indemnity

MMF

$72,500

B+

May-10



Series 2010-I

Class 3


Indemnity

MMF

$52,500

B-

May-10



Series 2010-I

Class 4


Indemnity

MMF

$117,500

Jun-10



Indemnity

MMF

$250,000

Jul-10


Sep-10

Groupama S.A.

Oct-10

AXA Global P&C

Nov-10

Dec-10

Merna Reinsurance III Ltd Shore Re Ltd.

Series 2010-1

Class A

US HU

Indemnity

MMF

$96,000

BB

Green Valley Ltd.

Series 2

Class A

EU Wind

Parametric Index

MTN

€100,000

BB+

Calypso Capital Limited

Series 2010-1

Class A

EU Wind

Industry Index

TPR

€275,000

BB

American Family Mutual Insurance Company

Mariah Re Ltd.

Series 2010-1

US ST

Industry Index

MMF

$100,000

B



Series 2010-II


Indemnity

MMF

$210,000

BB

Class 1

Fitch

Aon Benfield

61

Issuance Date

62

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

Dec-10



Series 2010-II

Class 2


Indemnity

MMF

$50,000

Dec-10



Series 2010-II

Class 3


Indemnity

MMF

$40,000

Dec-10

SCOR Global P&C SE


Series 2010-1

Class A

EU Wind, JP EQ

Parametric Index

TPR

€75,000

Dec-10


Vega Capital Ltd.

Series 2010-I

Class C


Multiple

MTN

$63,900

Dec-10


Vega Capital Ltd.

Series 2010-I

Class D


Multiple

MTN

$42,600

Dec-10

American Family Mutual Insurance Company

Mariah Re Ltd.

Series 2010-2

US ST

Industry Index

MMF

$100,000

Dec-10


Lodestone Re Ltd.

Series Class A-1 2010-2

US HU, EQ

Industry Index

MMF

$125,000

BB+

Dec-10


Lodestone Re Ltd.

Series Class A-2 2010-2

US HU, EQ

Industry Index

MMF

$325,000

BB

Dec-10


Montana Re Ltd.

Series 2010-1

Class C

US HU, EQ

Multiple

TPR

$70,000

B

Dec-10


Montana Re Ltd.

Series 2010-1

Class D

US HU, EQ

Multiple

TPR

$80,000

Dec-10


Montana Re Ltd.

Series 2010-1

Class E

US HU, EQ, EU Wind, JP TY, EQ

Multiple

TPR

$60,000

B-

Dec-10


Successor X Ltd.

Series 2011-1

Class III-R3

US HU, EQ , AUS EQ


MTN

$65,000

B-

Dec-10


Successor X Ltd.

Series 2011-1

Class III-S3

US HU, EQ , AUS EQ


MTN

$50,000

B-

Dec-10


Successor X Ltd.

Series 2011-1

Class III-T3

US HU, EQ , AUS EQ


MTN

$55,000

Dec-10

Groupama S.A.

Green Fields Capital Limited

Series 2011-1

Class A

EU Wind

Industry Index

MTN

€75,000

BB+

Feb-11


Foundation Re III Ltd.

Series 2011-1

Class A

US HU

Industry Index

MMF

$135,000

BB+

Feb-11


Successor X Ltd.

Series 2011-2

Class IV-E3

US HU, EQ

Industry Index

MTN

$160,000

B

Feb-11


Successor X Ltd.

Series 2011-2

Class IV-AL3

US HU, EQ

Industry Index

MTN

$145,000

Mar-11

Chubb Group

East Lane Re IV Ltd.

Series 2011-I

Class A

US HU, EQ, ST, WS

Indemnity

MMF

$225,000

BB+

Mar-11

Chubb Group

East Lane Re IV Ltd.

Series 2011-I

Class B

US HU, EQ, ST, WS

Indemnity

MMF

$250,000

BB

Mar-11

Munich Re

US HU, EU Wind

Industry Index

MMF

$100,000

BB-

Apr-11


Blue Fin Ltd.

Series 4

Class B

US HU, EQ

Modeled Loss

MMF

$40,000

May-11


Johnston Re Ltd.

Series 2011-1

Class A

US HU

Indemnity

MMF

$70,000

BB-

May-11


Johnston Re Ltd.

Series 2011-1

Class B

US HU

Indemnity

MMF

$131,835

BB-


Queen Street II Capital Limited

BBa3

Fitch

Issuance Date

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

May-11



Series 2011-I

Class 1


Indemnity

MMF

$57,000

B+

May-11



Series 2011-I

Class 2


Indemnity

MMF

$33,000

B-

May-11



Series 2011-I

Class 5


Indemnity

MMF

$160,000

B+

Jun-11

Argo Re, Ltd.

Loma Reinsurance Ltd.

Series 2011-1

Class A

US HU, EQ, EU Wind, JP EQ

Industry Index

TPR

$100,000

BB-

Jul-11

Munich Re

EU Wind

Industry Index

MMF

$150,000

B+

Aug-11


Class A

CAL EQ

Indemnity

MMF

$150,000

BB-

Aug-11

Electricité Réseau Distribution France

Pylon II Capital Limited

Class A

FR Wind

Parametric Index

TPR

€65,000

B+

Aug-11

Electricité Réseau Distribution France

Pylon II Capital Limited

Class B

FR Wind

Parametric Index

TPR

€85,000

B-

Aug-11


JP TY

Indemnity

MTN

$160,000

Oct-11

EU Wind

Industry Index

MTN

€180,000

BB-

US HU, EU Wind

Industry Index

MMF

$100,000

BB-

Queen Street III Capital Limited Embarcadero Reinsurance Ltd.

Series 2011-I

Kizuna Re Ltd.

Series 2011-1

AXA Global P&C

Calypso Capital Limited

Series 2011-1

Oct-11

Munich Re

Queen Street IV Capital Limited

Nov-11


Successor X Ltd.

Series 2011-3

Class V-F4

US HU

Industry Index

MMF

$80,000

Nov-11


Successor X Ltd.

Series 2011-3

Class V-X4

US HU, EU W

Industry Index

MMF

$50,000

Nov-11



Series 2011-II

Class 1


Indemnity

MMF

$100,000

Nov-11



Series 2011-II

Class 2


Indemnity

MMF

$50,000

Dec-11


Compass Re Ltd.

Series 2011-1

Class 1

US HU, EQ

Industry Index

MMF

$75,000

BB-

Dec-11


Compass Re Ltd.

Series 2011-1

Class 2

US HU, EQ

Industry Index

MMF

$250,000

BB-

Dec-11


Compass Re Ltd.

Series 2011-1

Class 3

US HU, EQ

Industry Index

MMF

$250,000

B+

Dec-11


Golden State Re Ltd.

Series 2011-1

US EQ

Modeled Loss

MMF

$200,000

BB+

Dec-11

SCOR Global P&C SE


Series 2011-1

Class A

US HU, EQ

Industry Index

MTN

$125,000

B

Dec-11

SCOR Global P&C SE


Series 2011-1

Class B

US HU, EQ

Industry Index

MTN

$145,000

B+

Dec-11

SCOR Global P&C SE


Series 2011-2

Class A

EU Wind

Industry Index

MTN

€50,000

B

Dec-11

Amlin AG

Tramline Re Ltd.

Series 2011-1

Class A

US HU, EQ, EU Wind

Industry Index

MMF

$150,000

B-

Dec-11

Argo Re, Ltd.

Loma Reinsurance Ltd.

Series 2011-2

Class A

US HU, EQ

Industry Index

MMF

$100,000

Class A

Fitch

B-

Aon Benfield

63

64

Issuance Date

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Jan-12

Assurant, Inc.

Ibis Re II Ltd.

Series 2012-1

Class A

US HU

Industry Index

MMF

$100,000

BB-

Jan-12

Assurant, Inc.

Ibis Re II Ltd.

Series 2012-1

Class B

US HU

Industry Index

MMF

$30,000

B-

Feb-12


Embarcadero Reinsurance Ltd.

Series 2012-I

Class A

CAL EQ

Indemnity

MMF

$150,000

BB-

Feb-12

Zenkyoren

Kibou Ltd.

Series 2012-1

Class A

JP EQ

Parametric Index

MMF

$300,000

BB+

Feb-12


Successor X Ltd.

Series 2012-1

Class V-AA3

US HU, EU Wind

Industry Index

MMF

$23,000

Feb-12


Successor X Ltd.

Series 2012-1

Class V-D3

US HU

Industry Index

MMF

$40,000

Feb-12

Munich Re

US HU, EU Wind

Industry Index

MMF

$75,000

Mar-12


Mystic Re III Ltd.

Series 2012-1

Class A

US HU, EQ (ex CA)

Indemnity

MMF

$100,000

BB

Mar-12


Mystic Re III Ltd.

Series 2012-1

Class B

US HU, EQ

Indemnity

MMF

$175,000

B

Mar-12

Chubb Group

East Lane Re V Ltd.

Series 2012

Class A Southeast HU, ST

Indemnity

MMF

$75,000

BB

Mar-12

Chubb Group

East Lane Re V Ltd.

Series 2012

Class B Southeast HU, ST

Indemnity

MMF

$75,000

BB-

Mar-12

COUNTRY Mutual & North Carolina Farm Bureau Mutual

Combine Re Ltd.

Class A

US HU, EQ, ST, WS

Indemnity

MMF

$100,000

Baa1

Mar-12


Combine Re Ltd.

Class B

US HU, EQ, ST, WS

Indemnity

MMF

$50,000

Ba3

Mar-12


Combine Re Ltd.

Class C

US HU, EQ, ST, WS

Indemnity

MMF

$50,000

Apr-12


Blue Danube Ltd.

Series 2012-1

Class A

US, CB, MX HU, US, CAN EQ

Industry Index

MTN

$120,000

BB+

Apr-12


Blue Danube Ltd.

Series 2012-1

Class B

US, CB, MX HU, NA EQ

Industry Index

MTN

$120,000

BB-

Apr-12


Pelican Re Ltd.

Series 2012-1

Class A

LA HU

Indemnity

MMF

$125,000

Apr-12

Mitsui Sumitomo Insurance Co., Ltd

Akibare II Ltd.

Series 2012-1

Class A

JP TY

Modeled Loss

MMF

$130,000

BB

Apr-12


Everglades Re Ltd.

Series 2012-1

Class A

FL HU

Indemnity

MMF

$750,000

B+

May-12


Mythen Ltd.

Series 2012-1

Class A

US HU

Industry Index

MTN

$50,000

Ba3

May-12


Mythen Ltd.

Series 2012-1

Class E

US HU

Industry Index

MTN

$100,000

Ba3

May-12


Mythen Ltd.

Series 2012-1

Class H

US HU, EU Wind

Industry Index

MTN

$250,000

B2

May-12



Series 2012-I

Class 3

US HU, EQ, ST, WS, CAL WF

Indemnity

MMF

$50,000

BB-

May-12



Series 2012-I

Class 5


Indemnity

MMF

$110,000

BB

May-12



Series 2012-I

Class 7


Indemnity

MMF

$40,000

Jun-12



Series 2012-1

Class A

Northeast HU

Indemnity

MMF

$250,000


Queen Street V Re Limited

Moody’s

S&P

B2

BB+

Fitch

Issuance Date

Beneficiary

Issuer

Jul-12

Munich Re

Queen Street VI Re Limited

Jul-12


Sep-12

Hannover Re

Oct-12

Series

Class

Perils

Trigger

Collateral

Size (thousands)

US HU, EU Wind

Industry Index

MMF

$100,000

B

Moody’s

S&P

Embarcadero Reinsurance Ltd.

Series 2012-II

Class A

CAL EQ

Indemnity

MMF

$300,000

BB+

Eurus III Ltd.

Series 2012-1

Class A

EU Wind

Industry Index

MTN

€100,000

BB-

Fund for Natural Disasters

MultiCat Mexico Limited

Series 2012-I

Class A

Mex EQ

Parametric

MMF

$140,000

B

Oct-12



Series 2012-I

Class B

Mex HU Atlantic

Parametric

MMF

$75,000

B+

Oct-12



Series 2012-I

Class C

Mex HU Pacific

Parametric

MMF

$100,000

B-

Oct-12

Munich Re

Queen Street VII Re Limited

US HU, EU Wind

Industry Index

MMF

$75,000

B

Nov-12

SCOR Global P&C SE

Atlas Reinsurance VII Limited

Class A

US HU, EQ

Industry Index

MTN

$60,000

BB-

Nov-12

SCOR Global P&C SE

Atlas Reinsurance VII Limited

Class B

EU Wind

Industry Index

MTN

€130,000

BB

Nov-12


Mythen Re Ltd.

Series 2012-2

Class A

US HU, U.K. Mortality

Industry Index

MTN

$120,000

B+

Nov-12


Mythen Re Ltd.

Series 2012-2

Class C

US HU

Industry Index

MTN

$80,000

B-

Nov-12



Series 2012-II

Class 1


Indemnity

MMF

$155,000

BB+

Nov-12



Series 2012-II

Class 2


Indemnity

MMF

$70,000

BB

Nov-12



Series 2012-II

Class 3


Indemnity

MMF

$95,000

Nov-12



Series 2012-II

Class 4


Indemnity

MMF

$80,000

Dec-12


Compass Re Ltd.

Series 2012-1

Class 1

US HU, EQ

Industry Index

MMF

$400,000

Dec-12

Zurich American Insurance Company, Zurich Insurance Company, Ltd.

US, CAN EQ

Indemnity

MMF

$270,000

B+

Mar-13


Mar-13

Citizens Property Insurance Company

Apr-13


Apr-13


Caelus Re 2013 Limited

Series 2013-2

Apr-13


Tar Heel Re Ltd.

Apr-13

Turkish Catastrophe Insurance Pool

May-13 May-13

Lakeside Re III Ltd. Caelus Re 2013 Limited

Series 2013-1

Class A

US HU, EQ

Indemnity

MMF

$270,000

BB-

Series 2013-1

Class A

FL HU

Indemnity

MMF

$250,000

B

New Madrid EQ

Indemnity

MMF

$300,000

Class A

US HU, EQ

Indemnity

MMF

$320,000

Series 2013-1

Class A

NC Hurricane

Parametric Index

MMF

$500,000

B+

Bosphorus 1 Re Ltd.

Series 2013-1

Class A

Turkey EQ

Industry Index

MMF

$400,000

BB+


Sanders Re Ltd.

Series 2013-1

Class A

US HU, EQ

Industry Index

MMF

$200,000

BB+


Sanders Re Ltd.

Series 2013-1

Class B

US HU, EQ

Indemnity

MMF

$150,000

BB

Everglades Re Ltd. Merna Re IV Ltd.

Fitch

Aon Benfield

65

Issuance Date

66

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

May-13

Louisiana Citizens Property Insurance Company

Pelican Re Ltd.

Series 2013-1

Class A

LA HU

Indemnity

MMF

$140,000

May-13

American Coastal Insurance Company

Armor Re Ltd.

Series 2013-1

Class A

Florida HU

Indemnity

MMF

$183,000

BB+

May-13

Travelers Indemnity Company


Series 2013-1

Class A

Northeast HU

Indemnity

MMF

$300,000

BB

May-13


Blue Danube II Ltd.

Series 2013-1

Class A

US/CB/MX HU & NA EQ

Industry Index

MTN

$175,000

BB+

May-13



Series 2013-I

Class 11


Indemnity

MMF

$205,000

May-13



Series 2013-I

Class 3


Indemnity

MMF

$95,000

B-

Jun-13

Assurant, Inc.

Ibis Re II Ltd.

Series 2013-1

Class A

US HU

Industry Index

MMF

$110,000

BB+

Jun-13

Assurant, Inc.

Ibis Re II Ltd.

Series 2013-1

Class B

US HU

Industry Index

MMF

$35,000

BB-

Jun-13

Assurant, Inc.

Ibis Re II Ltd.

Series 2013-1

Class C

US HU

Industry Index

MMF

$40,000

B

Jun-13

Munich Re

US HU, AUS CY


MMF

$75,000

Jun-13

Amlin AG

Jul-13

Queen Street VIII Re Limited Tramline Re II Ltd.

Series 2013-1

Class A

NA EQ

Industry Index

MMF

$75,000

Groupama S.A.

Green Fields II Capital Limited

Series 2013-1

Class A

FR Wind

Industry Index

MTN

€280,000

Jul-13


Mythen Re Ltd.

Series Class B-1 2013-1

US HU

Industry Index

MMF

$100,000

Jul-13

Renaissance Reinsurance Ltd.

Jul-13

American International Group

Jul-13

Metropolitan Transportation Authority

Aug-13

AXIS Specialty Limited

Sep-13


Oct-13

AXA Global P&C

Oct-13

BB

Mona Lisa Re Ltd.

Series 2013-2

Class A

US HU, EQ

Industry Index

MMF

$150,000

BB-

Tradewynd Re Ltd.

Series 2013-1

Class 1

US, CB HU, NA EQ

Indemnity

MMF

$125,000

B+

MetroCat Re Ltd.

Series 2013-1

Class A

Northeast Storm Surge

Parametric Index

MMF

$200,000

BB-

Northshore Re Limited

Series 2013-1

Class A

US HU, EQ

Industry Index

MMF

$200,000

BB-

Nakama Re Ltd.

Series 2013-1

Class 1

JP EQ

Indemnity

MMF

$300,000

BB+

Calypso Capital II Limited

Class A

EU Wind

Industry Index

MTN

€185,000

BB-

AXA Global P&C

Calypso Capital II Limited

Class B

EU Wind

Industry Index

MTN

€165,000

B+

Oct-13


Galileo Re Ltd.

Series 2013-1

Class A

US HU, EQ, EU Wind

Industry Index

MMF

$300,000

Dec-13



Series 2013-II

Class 1


Indemnity

MMF

$80,000

Dec-13



Series 2013-II

Class 4


Indemnity

MMF

$70,000

Dec-13


Tradewynd Re Ltd.

Series Class 1-A 2013-2

US/CB HU, NA EQ

Indemnity

MMF

$100,000

Dec-13


Tradewynd Re Ltd.


US/CB HU, NA EQ

Indemnity

MMF

$160,000


BB-

Fitch

Issuance Date

Beneficiary

Dec-13


Dec-13

Achmea Reinsurance Company N.V.

Dec-13

American Modern Insurance Group, Inc.

Dec-13

Issuer Tradewynd Re Ltd.

Class

Perils

Trigger

Collateral

Size (thousands)

Series Class 3-B 2013-2

US/CB HU, NA EQ

Indemnity

MMF

$140,000

Series

Windmill I Re Ltd.

Series 2013-1

Class A

EU Wind

Indemnity

MMF

€40,000

Queen City Re Ltd.

Series 2013-1

Class A

US HU

Indemnity

MMF

$75,000

Argo Re, Ltd.

Loma Reinsurance (Bermuda) Ltd.

Series 2013-1

Class A

US/CB HU, U.S. ST, NA/CB EQ

Indemnity, Industry Index

MMF

$32,000

Dec-13

Argo Re, Ltd.


Series 2013-1

Class B



MMF

$75,000

Dec-13

Argo Re, Ltd.


Series 2013-1

Class C



MMF

$65,000

Dec-13

QBE Insurance Group Limited

VenTerra Re Ltd.

Series 2013-1

Class A

US EQ, AUS CY, EQ

Indemnity

MMF

$250,000

Feb-14


Queen Street IX Re Limited

US HU, AUS CY

Multiple

MMF

$100,000

Mar-14

Chubb Group

Mar-14

American Strategic Insurance Group

Mar-14

Moody’s

S&P

BB


Series 2014-1

Class A

Northeast U.S. HU, EQ, ST, WS

Indemnity

MMF

$270,000

Gator Re Ltd.

Series 2014-1

Class A

US HU, ST

Indemnity

MMF

$200,000


Kizuna Re II Ltd.

Series 2014-1

Class A

JP EQ

Indemnity

MMF

$200,000

Mar-14


Kizuna Re II Ltd.

Series 2014-1

Class B

JP EQ

Indemnity

MMF

$45,000

Mar-14

Great American Insurance Company

Riverfront Re Ltd.

NA HU, EQ, ST & WS

Indemnity

MMF

$95,000

Mar-14


Merna Re V Ltd.

New Madrid EQ

Indemnity

MMF

$300,000

Apr-14


Citrus Re Ltd.

Series 2014-1

Class A

FL HU

Indemnity

MMF

$150,000

Apr-14


Citrus Re Ltd.

Series 2014-2

Class 1

FL HU

Indemnity

MMF

$50,000

Apr-14

Assicurazioni Generali S.p.A.

EU Wind

Indemnity

MTN

€190,000

Apr-14



Series 2014-1

Class A

SE HU

Industry Index

MMF

$250,000

BB-

Apr-14



Series 2014-1

Class B

NA HU, EQ

Industry Index

MMF

$200,000

BB-

May-14

American Coastal Insurance Company

Armor Re Ltd.

Series 2014-1

Class A

FL HU

Indemnity

MMF

$200,000

May-14


Everglades Re Ltd.

Series 2014-1

Class A

FL HU

Indemnity

MMF

$1,500,000

May-14


Sanders Re Ltd.

Series 2014-1

Class B

US HU, EQ

Industry Index

MMF

$330,000

BB+

May-14


Sanders Re Ltd.

Series 2014-1

Class C

US HU, EQ

Industry Index

MMF

$115,000

BB

May-14


Sanders Re Ltd.

Series 2014-1

Class D

US HU, EQ

Industry Index

MMF

$305,000

BB

Lion I Re Limited

Fitch

BB+

BB-

B+

B

Aon Benfield

67

Issuance Date

68

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Moody’s

S&P

Fitch

May-14

Castle Key Insurance Company and Castle Key Indemnity Company

Sanders Re Ltd.

Series 2014-2

Class A

FL HU, EQ, ST

Indemnity

MMF

$200,000

May-14


Nakama Re Ltd.

Series 2014-1

Class 1

JP EQ

Indemnity

MMF

$150,000

May-14


Nakama Re Ltd.

Series 2014-1

Class 2

JP EQ

Indemnity

MMF

$150,000

May-14



Series 2014-I

Class 10


Indemnity

MMF

$80,000

May-14



Series 2014-I

Class 13


Indemnity

MMF

$50,000

May-14

Sompo Japan and Nipponkoa Insurance Company

Aozora Re Ltd.

Series 2014-1

Class B

JP TY

Indemnity

MMF

¥10,125,000

Jun-14


Alamo Re Ltd.

Series 2014-1

Class A

TX HU

Indemnity

MMF

$400,000

Sept-14



Series 2014-1

Class A

US EQ

Modeled Loss

MMF

$250,000

BB+

Nov-14



Series 2014-2

Class C

NA EQ

Industry Index

MMF

$500,000

BB-

Dec-14


Ursa Re Ltd.

Series 2014-1

Class A

CAL EQ

Indemnity

MMF

$200,000

Dec-14


Ursa Re Ltd.

Series 2014-1

Class B

CAL EQ

Indemnity

MMF

$200,000

Dec-14



Series 2014-II

Class 4

US HU, EQ, ST, WS, WF, VE, MI

Indemnity

MMF

$100,000

Dec-14

Amlin AG

Tramline Re II Ltd.

Series 2014-1

Class A

US HU, EQ & EU Wind

Industry Index

MMF

$200,000

Dec-14


Tradewynd Re Ltd.



Indemnity

MMF

$100,000

B

Dec-14


Tradewynd Re Ltd.



Indemnity

MMF

$100,000

BB-

Dec-14


Tradewynd Re Ltd.



Indemnity

MMF

$300,000

B

Dec-14


Nakama Re Ltd.

Series 2014-2

Class 1

JP EQ

Indemnity

MMF

$175,000

Dec-14


Nakama Re Ltd.

Series 2014-2

Class 2

JP EQ

Indemnity

MMF

$200,000

Feb-15


Galileo Re Ltd.

Series 2015-1

Class A

US HU, NA EQ, EU Wind

Industry Index

MMF

$300,000

Feb-15

SCOR Global P&C SE


Series 2015-1

Class A

US HU, NA EQ

Industry Index

MMF

$150,000

Mar-15



Series 2015-I

Class A

Northest HU, EQ, ST, WS, WF, VE, MI

Indemnity

MMF

$250,000

Mar-15


Kizuna Re II Ltd.

Series 2015-1

Class A

JP EQ

Indemnity

MMF ¥35,000,000


BB

B

BB

BBB-

Issuance Date

Beneficiary

Issuer

Series

Class

Perils

Trigger

Collateral

Size (thousands)

Series 2015-1

Class A

FL HU

Indemnity

MMF

$100,000

US HU, AUS CY

Industry Index and Modeled Loss

MMF

$100,000

Moody’s

S&P

Fitch

Mar-15


Manatee Re Ltd.

Mar-15



Mar-15


Merna Re Ltd.

Series 2015-1

Class A

New Madrid EQ

Indemnity

MMF

$300,000

Apr-15


Citrus Re Ltd.

Series 2015-1

Class A

FL HU

Indemnity

MMF

$150,000

Apr-15


Citrus Re Ltd.

Series 2015-1

Class B

FL HU

Indemnity

MMF

$97,500

Apr-15


Citrus Re Ltd.

Series 2015-1

Class C

FL HU

Indemnity

MMF

$30,000

Apr-15


Pelican III Re Ltd.

Series 2015-1

Class A

LA HU

Indemnity

MMF

$100,000

Apr-15

Massachusetts Property Insurance Underwriting Associaton

Cranberry Re Ltd.

Series 2015-1

Class A

MA HU, ST, WS

Indemnity

MMF

$300,000

May-15


Everglades Re Ltd.

Series 2015-1

Class A

FL HU

Indemnity

MMF

$300,000

Apr-15


Alamo Re Ltd.

Series 2015-1

Class A

TX HU

Indemnity

MMF

$300,000

B+

Apr-15


Alamo Re Ltd.

Series 2015-1

Class B

TX HU

Indemnity

MMF

$400,000

BB-

May-15



Series 2015-1

Class A

Northeast HU, EQ, ST, WS

Indemnity

MMF

$300,000

BB-

May-15



Series 2015-I

Class 10


Indemnity

MMF

$50,000

May-15



Series 2015-I

Class 11


Indemnity

MMF

$100,000

Jun-15


Compass Re II Ltd.

Series 2015-1

Class 1

US HU

Parametric Index

MMF

$300,000

B+

Jun-15

UnipolSai Assicurazioni S.p.A


Class A

EU EQ

Indemnity

EBRD Notes

€ 200,000

BB+

B

BB

Aon Benfield

69

70


Appendix III Life and Health Catastrophe Bonds— Transaction Summary As of June 30, 2015 Source: Aon Securities Inc.

Aon Benfield

71

Summary of life and health catastrophe bonds — December 1996 through June 2015

72

Issuance date

Beneficiary

Issuer

Series

Dec-03

Swiss Reinsurance Company, Ltd.

Vita Capital Ltd.

Series 1

Apr-05


Vita Capital II Ltd.

Series 1

Apr-05



Apr-05


Apr-06

Class

Perils

Trigger

Size (thousands)

S&P

Extreme Mortality

Index

$400,000

A+

Class B

Extreme Mortality

Index

$62,000

A-

Series 1

Class C

Extreme Mortality

Index

$200,000

BBB+


Series 1

Class D

Extreme Mortality

Index

$100,000

BBB-

Scottish Annuity & Life Insurance Company (Cayman) Ltd.

Tartan Capital Limited

Series 1

Class A

Extreme Mortality

Index

$75,000

AAA

Apr-06

Scottish Annuity & Life Insurance Company (Cayman) Ltd.

Tartan Capital Limited

Series 1

Class B

Extreme Mortality

Index

$80,000

A-

Nov-06

AXA Cessions

OSIRIS Capital plc

Series 1

Class B

Extreme Mortality

Index

€100,000

BBB

Nov-06

AXA Cessions

OSIRIS Capital plc

Series 2

Class B

Extreme Mortality

Index

€50,000

BB+

Nov-06

AXA Cessions

OSIRIS Capital plc

Series 3

Class C

Extreme Mortality

Index

$150,000

A

Nov-06

AXA Cessions

OSIRIS Capital plc

Series 3

Class D

Extreme Mortality

Index

$100,000

A

Dec-06


Vita Capital III Ltd.

Series 1

Class B

Extreme Mortality

Index

$90,000

A

Dec-06



Series 2

Class B

Extreme Mortality

Index

$50,000

AAA

Dec-06



Series 3

Class B

Extreme Mortality

Index

€30,000

AAA

Jan-07



Series 4

Class A

Extreme Mortality

Index

$100,000

AAA

Jan-07



Series 5

Class A

Extreme Mortality

Index

$100,000

AAA

Jan-07



Series 5

Class B

Extreme Mortality

Index

$50,000

AAA

Jan-07



Series 6

Class A

Extreme Mortality

Index

€55,000

AAA

Jan-07



Series 6

Class B

Extreme Mortality

Index

€55,000

AAA

Jan-07



Series 7

Class A

Extreme Mortality

Index

€100,000

AA-

Feb-08

Munich Re

Nathan Ltd.

Series 1

Class A

Extreme Mortality

Index

$100,000

A-

Jan-09


Vita Capital IV Ltd.

Series 1

Class E

Extreme Mortality

Index

$75,000

BB+

May-10



Series III

Class E

Extreme Mortality

Index

$50,000

BB+


Issuer

Series

Class

Perils

Trigger

Size (thousands)

Issuance date

Beneficiary

S&P

Oct-10



Series III

Class E

Extreme Mortality

Index

$100,000

BB+

Oct-10



Series IV

Class E

Extreme Mortality

Index

$75,000

BB+

Dec-10

Aetna Life Insurance Company

Vitality Re Limited

Series 2010-1

Class A

Health

Indemnity - MBR

$150,000

BBB-

Dec-10


Kortis Capital Ltd.

Series 2010-1

Class E

Longevity

Index

$50,000

BB+

Apr-11


Vitality Re II Limited

Series 2011-1

Class A

Health

Indemnity - MBR

$110,000

BBB

Apr-11


Vitality Re II Limited

Series 2011-1

Class B

Health

Indemnity - MBR

$40,000

BB+

Aug-11



Series V

Class D

Extreme Mortality

Index

$100,000

BBB-

Aug-11



Series VI

Class E

Extreme Mortality

Index

$80,000

BB+

Jan-12


Vitality Re III Limited

Series 2012-1

Class A

Health

Indemnity - MBR

$105,000

BBB+

Jan-12


Vitality Re III Limited

Series 2012-1

Class B

Health

Indemnity - MBR

$45,000

BB+

Jul-12


Vita Capital V Ltd.

Series 2012-I Class D-1

Extreme Mortality

Index

$125,000

BBB-

Jul-12


Vita Capital V Ltd.

Series 2012-I

Class E-1

Extreme Mortality

Index

$150,000

BB+

Jan-13


Vitality Re IV Limited

Series 2013-1

Class A

Health

Indemnity - MBR

$105,000

BBB+

Jan-13


Vitality Re IV Limited

Series 2013-1

Class B

Health

Indemnity - MBR

$45,000

BB+

Sep-13

SCOR Global Life SE


Series 2013-1

Class B

Extreme Mortality

Index

$180,000

BB

Jan-14


Vitality Re V Limited

Series 2014-1

Class A

Health

Indemnity - MBR

$140,000

BBB+

Jan-14



Series 2014-1

Class B

Health

Indemnity - MBR

$60,000

BB+

Jan-14



Series 2014-1

Class A

Health

Indemnity - MBR

$140,000

BBB+

Jan-14



Series 2014-1

Class B

Health

Indemnity - MBR

$60,000

BB+

Jan-15


Vitality Re VI Limited

Series 2015-1

Class A

Health

Indemnity - MBR

$140,000

BBB+

Jan-15


Vitality Re VI Limited

Series 2015-1

Class B

Health

Indemnity - MBR

$60,000

BB+

Apr-15

Axa Global Life


Class A

Extreme Mortality

Index

€ 135,000

BB+

Apr-15

Axa Global Life


Class B

Extreme Mortality

Index

€ 150,000

BB

Aon Benfield

73

74


Appendix IV Summary of Sidecar Issuance As of June 30, 2015 Source: Aon Securities Inc., company filings, press releases

Aon Benfield

75

Summary of sidecar issuance Sidecar

Inception

Lines of Business

Size ($ millions)

Top Layer Re

RenaissanceRe, SF

Dec-99

High excess U.S. property cat

100.0

Olympus Re

White Mountains Re

Dec-01

Property cat, property risk, retro and marine

500.0

RenaissanceRe, SF

Dec-01

Property cat reinsurance

600.0

DaVinci Re Rockridge Re

Montpelier Re

Jun-05

High excess cat retrocessional

90.9

Blue Ocean Re

Montpelier Re

Dec-05

Property cat retrocessional

300.0

Cyrus Re

XL Capital

Dec-05

Property cat reinsurance and retrocessional

525.0

Flatiron Re

Arch Re

Dec-05

Property and marine reinsurance

900.0

Helicon Re

White Mountains Re

Dec-05

Short-tailed property and marine

146.0

Kaith/K5 Olympus Re II Petrel Re Starbound Re Bay Point Re Sirocco Re

Hannover Re

Dec-05

Property cat, property risk, aviation and marine

370.0

White Mountains Re

Jan-06

Property cat, property risk, retro and marine

156.0

Validus

May-06

Marine and offshore energy reinsurance contracts

125.0

RenaissanceRe

May-06

Short-tailed property and marine

310.5

Harbor Point

Jun-06

US property, marine, retro and workers’ comp

150.0

Lancashire

Jun-06

Marine and offshore energy insurance contracts

75.0

Timicuan Re

RenaissanceRe

Jul-06

Reinstatement premium protection

70.0

Concord Re

Lexington Insurance Co

Aug-06

US commercial property

730.0

Mont Fort Re

Flagstone Re

Aug-06

Peak zone and ILW

60.0

XL Capital

Nov-06


635.0

Panther Re

Hiscox

Dec-06


360.0

Syncro Ltd.

Lloyd’s #4242 (Chaucer)

Dec-06


100.0

Brit Insurance

Dec-06


107.7

Cyrus Re

Norton Re New Point Re

Harbor Point

Dec-06


250.0

Triomphe Re

Paris Re

Dec-06


185.0

Sector Re

Swiss Re

Jan-07

Property cat, aviation

220.0

MaRI Ltd.

ACE

Jan-07


400.0

Ark Underwriting

Jan-07


40.0

Syndicate 6105 Syndicate 6104

Hiscox

Jan-07


69.0

Syndicate 6103

MAP Underwriting

Jan-07


78.6

Bridge Re Starbound Re II Mont Gele Re Norton Re II Sector Re II Cyrus Re ll

Swiss Re

Apr-07


182.5

RennaisanceRe

Jun-07


341.5

Flagstone Re

Jul-07


60.0

Brit Insurance

Dec-07


118.2

Swiss Re

Apr-08


150.0

XL Capital

Dec-07


140.0

New Point Re II

Harbor Point

Dec-07


100.0

Globe Re

Hannover Re

May-08


133.0

Kaith/K6 Timicuan Re II Fac Pool Re AlphaCat Re

76

Principal Sponsor


Hannover Re

Mar-09

Property cat, property risk, aviation and marine

180.0

RenaissanceRe

Jun-09

Property cat retrocessional, primarily Florida

60.4

Hannover Re

Sep-09

Worldwide facultative

60.0

Validus

May-11


180.0

Sidecar Accordion Re New Point Re IV

Inception

Lines of Business

Size ($ millions)

Lancashire Re

Jul-11

Property cat

200.0

Alterra

Jul-11


225.0

RenaissanceRe

Jan-12


73.7

SPS 20881

Catlin

Jan-12

Various lines (Syndicate 2003 quota share)

77.5

1

SPS 6111

Catlin

Jan-12


93.0

SPS 61121

Catlin

Jan-12


41.9

Upsilon Re

PacRe Timicuan Re III New Point Re V AlphaCat Re 2012

Validus

Mar-12

Property cat reinsurance (top layer)

500.0

RenaissanceRe

Jun-12

Property cat retrocessional, primarily Florida

73.7

Alterra

Jun-12


210.0

Validus

Jun-12


70.0

Lancashire Re

Nov-12

Combined exposure UNL aggregate reinsurance product

250.0

New Point Re V

Alterra Capital

Dec-12


37.0

Upsilon Re II

RenaissanceRe

Jan-13

Worldwide aggregate retrocessional reinsurance

185.0

Argo Group

Jan-13

Portfolio for both insurance and reinsurance

Undisclosed

Saltire Re I

Harambee Re AlphaCat Re 2013

Validus

Jan-13

Worldwide property cat reinsurance and retrocession

230.0

Everest Re

Jan-13

Worldwide property cat reinsurance

250.0

K Cession

Hannover Re

Mar-13

Peak property cat and whole account XOL non-marine

328.0

Lorenz Re

PartnerRe

Mar-13

Worldwide property cat reinsurance for select accounts

75.0

ACE

Apr-13

Worldwide property cat insurance and reinsurance

95.0

Lancashire

Jul-13

Property, energy, marine, aviation and Lloyd’s

270.0

XL

Jul-13

Collateralized reinsurance and capital markets

Est. 200

Markel

Jul-13


215.0

Montpelier

Nov-13


175.0

Validus

Dec-13


160.0

Mt. Logan Re

Altair Re Kinesis New Ocean Capital Management New Point VI Blue Capital Re. Holdings AlphaCat 2014 Atlas Reinsurance X Silverton Re Eden Re Altair Re II Harambee Re Upsilon RFO Pangaea IX Silverton Re

SCOR

Dec-13


56.0

Aspen Re

Dec-13


65.0

Munich Re

Jan-14


63.0

ACE

Jan-14

Worldwide property cat insurance and reinsurance

95.0

Argo

Jan-14

Property reinsurance

Undisclosed

RenaissanceRe

Jan-14

Worldwide aggregate cat retrocessional

265.0

TransRe

May-14

Retrocessional

Undisclosed

Aspen Re

Dec -14


85.0

Eden Re II

Munich Re

Dec-14


75.0

Eden Re I 2015-1

Munich Re

Dec-14


Undisclosed

TransRe

Dec-14


Undisclosed

Brit

Jan-15


75.0

Validus

Jan-15


155.0

Swiss Re

Apr-15


190.7

PartnerRe

Apr-15


84.0

Pangaea Re Versutus AlphaCat 2015 Sector Re V Ltd. Lorenz Re Ltd. 1

Principal Sponsor

Converted at £1.00 = $1.55 as of January 1, 2012. Whole account quota share of the Catlin Syndicate at Lloyd’s (Syndicate 2003)

Aon Benfield

77

78


Contact Paul Schultz Chief Executive Officer, Aon Securities Inc. +1 312 381 5256 paul.schultz@aonbenfield.com

About Aon Benfield Aon Benfield, a division of Aon plc (NYSE: AON), is the world‘s

Through our professionals’ expertise and experience, we advise

leading reinsurance intermediary and full-service capital

clients in making optimal capital choices that will empower

advisor. We empower our clients to better understand, manage

results and improve operational effectiveness for their business.

and transfer risk through innovative solutions and personalized

With more than 80 offices in 50 countries, our worldwide

access to all forms of global reinsurance capital across treaty,

client base has access to the broadest portfolio of integrated

facultative and capital markets. As a trusted advocate, we

capital solutions and services. To learn how Aon Benfield helps

deliver local reach to the world‘s markets, an unparalleled

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© Aon Securities Inc. 2015 | All Rights Reserved Aon Securities Inc. is providing this document, Insurance-Linked Securities 2015, and all of its contents (collectively, the “Document”) for general informational and discussion purposes only, and this Document does not create any obligations on the part of Aon Securities Inc., Aon Securities Limited and their affiliated companies (collectively, “Aon”). This Document is not intended and should not be construed as advice, opinions or statements with respect to any specific facts, situations or circumstances and Recipients should not take any actions or refrain from taking any actions, make any decisions (including any business or investment decisions), or place any reliance on this Document (including without limitation on any forward-looking statements). This Document is not intended, nor shall it be construed as (1) an offer to sell or a solicitation of an offer to buy any security or any other financial product or asset, (2) an offer, solicitation, confirmation or any other basis to engage or effect in any transaction or contract (in respect of a security, financial product or otherwise), or (3) a statement of fact, advice or opinion by Aon or its directors, officers, employees, and representatives (collectively, the “Representatives”). Any projections or forwardlooking statements contained or referred to in this Document are subject to various assumptions, conditions, risks and uncertainties (which may be known or unknown and which are inherently unpredictable) and any change to such items may have a material impact on the information set forth in this Document. Actual results may differ substantially from those indicated or assumed in this Document. No representation, warranty or guarantee is made that any transaction can be effected at the values provided or assumed in this Document (or any values similar thereto) or that any transaction would result in the structures or outcomes provided or assumed in this Document (or any structures or outcomes similar thereto). Aon makes no representation or warranty, whether express or implied, that the products or services described in this Document are suitable or appropriate for any sponsor, issuer, investor or participant, or in any location or jurisdiction. The information in this document is based on or compiled from sources that are believed to be reliable, but Aon has made no attempts to verify or investigate any such information or sources. Aon undertakes no obligation to review, update or revise this Document based on changes, new developments or otherwise, nor any obligation to correct any errors or inaccuracies in this Document. This Document is made available on an “as is” basis, and Aon makes no representation or warranty of any kind (whether express or implied), including without limitation in respect of the accuracy, completeness, timeliness, or sufficiency of the Document. Aon does not provide and this Document does not constitute any form of legal, accounting, taxation, regulatory, or actuarial advice. Recipients should consult their own professional advisors to undertake an independent review of any legal, accounting, taxation, regulatory, or actuarial implications of anything described in or related to this Document. Aon and its Representatives may have independent business relationships with, and may have been or in the future will be compensated for services provided to, companies mentioned in this Document. To the maximum extent permitted by law, Aon and its Representatives disclaim any and all liability relating to this Document, and neither Aon nor any of its Representatives shall have any liability to any party for any claim, loss, damage or liability in any way arising from, relating to, or in connection with this Document (including without limitation any actions or inactions, reliance or decisions based upon this Document) or any errors in or omissions from this Document (including without limitation the correctness, accuracy, completeness, timeliness, sufficiency, quality, pricing, reliability, performance, adequacy, or reasonableness of the information contained in this Document). To the maximum extent permitted by law, neither Aon nor its Representatives will be liable, in any event, for any special, indirect, consequential, or punitive loss or damage of any kind arising from, relating to or in connection with this Document.

About Aon Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 69,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com. © Aon plc 2015. All rights reserved. The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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