Aug 30, 2013 - aspect of the ILS sector, please contact me or my colleagues. ...... and was downgraded by the National H
Insurance-Linked Securities
Capital Revolution — ILS Market Expands to New Heights 2013
Empower Results®
Aon Benfield Securities, Inc. and Aon Benfield Securities Limited (collectively, “Aon Benfield 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 Benfield 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 Benfield 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 Benfield Securities, Inc. and Aon Benfield Securities Limited are all wholly-owned subsidiaries of Aon plc. Securities advice, products and services described within this report are offered solely through Aon Benfield Securities, Inc. and/or Aon Benfield Securities Limited.
Aon Benfield Securities
Foreword It is my pleasure to bring to you the sixth iteration of Aon Benfield Securities’ annual Insurance Linked Securities (ILS) report. As with all our research, this study aims to offer an authoritative review and analysis of the ILS asset class and, along with our quarterly ILS Updates, is intended to be an important and useful reference document for both ILS market participants and those with an active interest in the sector. Unless otherwise stated, this report covers the 12 month period ending June 30, 2013, during which time the ILS market received record capital inflows from both new and existing investors. In the first quarter of 2013, this drove spread decreases between 30 and 45 percent from the fourth quarter of 2012. This spurred an active issuance period for the first half of 2013, with the highest issuance levels since 2007. Specifically, the 2013 edition of this study offers: • O ur comprehensive review of the catastrophe bond market and the drivers affecting the market; • Our exclusive Aon Benfield ILS Indices; • A review of investor activity; • An overview of related ILS markets; • A review of activity in the U.S. market; • Our perspective on diversifying perils; • A market discussion with ILS investors. In all, the catastrophe bond market has seen $50.7 billion of cumulative issuance since 1996, demonstrating its importance as a strategic and efficient risk management tool.
We hope you will find this document both useful and informative. If you have any questions relating to the data herein, or indeed any queries regarding any aspect of the ILS sector, please contact me or my colleagues.
Paul Schultz Chief Executive Officer, Aon Benfield Securities
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Insurance-Linked Securities 2013
Contents 5 Aon Benfield Securities' Annual Review
of the Catastrophe Bond Market
13 ILS Investor Activity
The Aon Benfield ILS Indices 19 22 ILS-Related Markets 25 U.S. Perils 29 Europe Perils 31 Asia / Pacific Region 33 A Market Discussion with ILS Investors
Appendix I 44 Catastrophe Bond Issuance Statistics 50 Appendix II
Property Catastrophe Bonds — Transaction Summary 70 Appendix III
Life & Health Catastrophe Bonds — Transaction Summary 72 Appendix IV
Summary of Sidecar Issuance
4
Aon Benfield Securities
Aon Benfield Securities' Annual Review of the Catastrophe Bond Market Overview The year ending June 30, 2013 was a dynamic period for the insurance-linked securities (ILS) market. Large investor inflows, from both new and existing participants, drove declining spreads which in turn sparked increasing sponsor interest. As of June 30, annual issuance volume reached $6.7 billion (Figure 1) and total bonds on risk were at an all-time high of $17.5 billion (Figure 2), an increase of $2.6 billion from the previous year and surpassing the previous record of $16.2 billion at June 30, 2008. Figure 1: Catastrophe Bond Issuance by Year (Years ending June 30) 9,000
Property Issuance Life / Health Issuance
8,145
8,000
USD Millions
7,000
6,430
6,665
5,914
6,000 5,000
4,661
4,000
4,382
3,279
3,000 1,958
2,000 1,000 0
1,780
1,499 1,011
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Aon Benfield Securities
5
Insurance-Linked Securities 2013
Figure 2: Outstanding and Cumulative Catastrophe Bond Volume, 2003 – 2013 (Years ending June 30)
45,000
Life / Health Outstanding
Total Cumulative Bonds
44,035
40,000
USD Millions
Cumulative Property Issuance
50,700
50,000
Property Outstanding
37,605
35,000
33,223
30,000
28,562 26,782
25,000 20,867
20,000 15,000
0
12,911
12,723
10,000 5,000
17,513
16,155
7,945
9,444
3,876
2003
2004
2005
13,167
2009
2010
11,504
6,608
4,741
3,005
13,249
14,923
2006
2007
2008
2011
2012
2013
Source: Aon Benfield Securities
The new record level of catastrophe bonds on risk highlights the recent expansion of the ILS market. An increasing number of bonds will mature over the next two years due to the increase in issuance following the global financial crisis. Aon Benfield Securities forecasts that the market expansion will continue, as new issuance volumes are expected to outweigh maturities in the coming years. Figure 3: Catastrophe Bonds Maturing by Year (Years ending June 30) 6,000
Property Maturities Life / Health Maturities
5,674
USD Millions
5,000
5,585
4,531
4,157 3,939
4,000
3,900
3,000 2,670
2,483
2,000
804
1,000
371 155
0
Source: Aon Benfield Securities
6
2008
2009
425
329 100
2010
2011
2012
2013
2014
250
2015
Aon Benfield Securities
Key Market Drivers • Supply and Demand In the 18 months ending June 30, 2013, there were large capital inflows across the ILS sector from both existing and new investors. Since January 2012, an estimated $5 to 6 billion in new capital has entered the market, with around $3 billion flowing into the market in the last six months. This additional capital has created strong demand from investors for new issuance. In 2013, sponsors began benefitting from this demand, with transactions often closing at spreads below the rates expected in the traditional reinsurance markets. Spreads were down between 30 percent and 45 percent in the first half of 2013, compared to the fourth quarter of 2012. This spurred a very active period of issuance for the first half of 2013, which continued well into the third quarter. Investors kept pace with the primary activity, even during periods where many transactions were on offer simultaneously.
• Enhanced Coverage Indemnity issuances continued to be an important component of the catastrophe bond market, comprising 13 of the 27 issuances that closed in the year ending June 30, 2013. A number of sponsors securing U.S. hurricane coverage also locked in capacity for longer than the typical three years. These included Nationwide Mutual Insurance Company (Nationwide Mutual), Allstate Insurance Company (Allstate), Louisiana Citizens Property Insurance Company (Louisiana Citizens) and Amlin AG, which all secured coverage for four years. American International Group (AIG) successfully moved to an indemnity trigger, following several industry index transactions. The ground-breaking indemnity transaction, which includes commercial property and energy risks, provides AIG with coverage for five years.
• Benign Loss Activity There was no loss activity that resulted in catastrophe bond payouts for the year ending June 30, 2013. Superstorm Sandy, which made landfall in the United States on October 29, 2012, gained significant attention due to the amount of Northeast exposure in the ILS market. As losses were reported over the following months, and as Property Claim Services’ (PCS) estimate of the total industry insured property losses stabilized, it became clear that Sandy was unlikely to impact the catastrophe bond market.
Transaction Review Twenty seven transactions (including three deals covering life and health risks) closed during the 12-month period ending June 30, 2013. The average transaction size increased to $247 million for this period, compared to $211 million for the 12-month period ending June 30, 2012. U.S. hurricane risk continued to be the main peril ceded to the ILS market, and comprised around two thirds of notional limit issued over the 12 months. The contribution to expected modeled loss from U.S. hurricane risk for new property
7
Insurance-Linked Securities 2013
catastrophe issuances increased from 51 percent for the year ending June 30, 2012 to 56 percent for the same period in 2013. By comparison, the contribution from Europe windstorms decreased from 17 percent to six percent in the same timeframe. The contribution to expected modeled loss from U.S. earthquakes increased slightly from 20 percent to 23 percent. Meanwhile, life and health issuance activity contributed $545 million of issuance across three transactions. This includes one class of notes from Mythen Re Ltd. Series 2012-2 (Mythen Re 2012-2), which provides Swiss Reinsurance Company Ltd. (Swiss Re) with coverage for both UK extreme mortality and U.S. hurricanes.
Third Quarter 2012 Four transactions totaling $804 million closed during the third quarter of 2012. The issuances offered investors a diverse selection of perils including Europe windstorm, California earthquake, Japan typhoon and extreme mortality. Transactions issued in the third quarter of 2012 include: • E mbarcadero Reinsurance Ltd. (Embarcadero Re), sponsored by the California Earthquake Authority (CEA), provides indemnity coverage on an annual aggregate basis. The transaction was upsized to $300 million, providing the CEA with $600 million of total capacity from cat bonds; and • E urus III Ltd. (Eurus III), sponsored by Hannover Rückversicherung AG (Hannover Re) provides €100 million coverage against Europe windstorms for four seasons on an industry index basis. The transaction utilize European Bank for Reconstruction and Development (EBRD) notes as collateral, which provide an investment yield of 3M Euribor less 38 basis points. Table 1: Third Quarter 2012 Catastrophe Bond Issuance Beneficiary Münchener RückversicherungsGesellschaft Aktiengesellschaft in München (Munich Re)
Swiss Re
Issuer
Series
Size (millions)
Covered Perils
Trigger
Collateral
$100.0
US HU, EU Wind
Industry Index
MMF
Class D-1
$125.0
AUS, CAN Mortality IBRD Notes
$150.0
AUS, CAN, US Mortality
Industry Index
Class E-1
$300.0
CAL EQ
Indemnity
MMF
€100.0*
EU Wind
Industry Index
EBRD Notes
Class
Queen Street VI Re Limited
Vita Capital V Ltd.
Series 2012-I
CEA
Embarcadero Reinsurance Ltd.
Series 2012-II
Class A
Hannover Re
Eurus III Ltd.
Series 2012-1
Class A
Total Closed During Q3 2012
$804.1
Source: Aon Benfield Securities * Converted at €1.00 = $1.29 as of September 13, 2012
Legend AUS – Australia CAL – California CAN – Canada EU – Europe
US – United States EQ – Earthquake HU – Hurricane
Historically, the third quarter has been characterized by light issuance volumes. In the past couple of years, however, issuance volumes for the third quarter have increased; this trend continued in 2013.
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Aon Benfield Securities
Fourth Quarter 2012 Seven transactions closed in the fourth quarter of 2012, totaling $1.9 billion. New issuances were sourced solely from repeat sponsors and included the following transactions: • M ultiCat Mexico Limited Series 2012-I, the second issuance from the existing program, provides $315 million in protection for The Fund for Natural Disasters on a parametric basis. The three classes of notes provide coverage against Mexico earthquakes as well as hurricanes from the Pacific and Atlantic. • C ompass Re Ltd. Series 2012-1 provides National Union Fire Insurance Company of Pittsburgh (AIG) with $400 million in coverage against hurricanes and earthquakes on an industry index basis. The two-year transaction was not initially broadly marketed, but is tradable in the secondary market. Table 2: Fourth Quarter 2012 Catastrophe Bond Issuance Beneficiary
Issuer
The Fund for Natural Disasters
MultiCat Mexico Limited
Munich Re
Queen Street VII Re Limited
SCOR Global P&C SE (SCOR)
Atlas Reinsurance VII Limited
Swiss Re
Mythen Re Ltd.
Series
Class
Size (millions)
Class A
$140.0
MX EQ
Series 2012-I
Class B
$75.0
MX HU
Class C
$100.0
MX HU
$75.0
US HU, EU Wind
Class A
$60.0
US HU, EQ
Class B
€130.0 *
EU Wind
Class A
$120.0
US HU, UK Mortality
Class C
$80.0
US HU
Class 1
$155.0
Series 2012-2
Residential Reinsurance 2012 Limited
Series 2012-II
AIG
Compass Re Ltd.
Series 2012-1
Zurich American Insurance Company and Zurich Insurance Company Ltd. (Zurich)
Lakeside Re III Ltd.
United Services Automobile Association (USAA)
Total Closed During Q4 2012
Source: Aon Benfield Securities * Converted at €1.00 = $ 1.29 as of November 1, 2012
Covered Perils
Trigger
Collateral
Parametric
MMF
Industry Index
MMF
Industry Index
EBRD Notes
Industry Index
IBRD Notes
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
Class 2
$70.0
Class 3
$95.0
Class 4
$80.0
Class 1
$400.0
US HU, EQ
Industry Index
MMF
$270.0
US, CAN EQ
Indemnity
MMF
$1,888.2 Legend CAL – California CAN – Canada EU – Europe MX – Mexico UK – United Kingdom US – United States
EQ – Earthquake HU – Hurricane ST – Severe Thunderstorm WF – Wildfire WS – Winter Storm
9
Insurance-Linked Securities 2013
First Quarter 2013 Catastrophe bond issuance for 2013 began with a relatively light first quarter. Three transactions closed totaling $670 million, including one health bond. The other transactions comprised: • C aelus Re 2013 Limited Series 2013-1 (Caelus Re 2013-1), sponsored by Nationwide Mutual, provides coverage against U.S. hurricanes and earthquakes. The transaction closed well below marketed price guidance and was upsized to $270 million. Caelus Re 2013-1 was the first property catastrophe bond to close in 2013 and demonstrated the dramatic spread decreases from the fourth quarter 2012, as discussed earlier. Nationwide Mutual returned in the second quarter of 2013 with a subsequent issuance, bringing their total on-risk coverage from catastrophe bonds to $590 million. • E verglades Re Ltd. Series 2013-1 (Everglades Re 2013), sponsored by Citizens Property Insurance Corporation (Florida Citizens), closed its second catastrophe bond transaction in two years. Everglades Re 2013 provides $250 million in indemnity coverage for Florida Citizens, bringing its total on-risk coverage to $1.0 billion from catastrophe bonds. Florida Citizens also benefitted from the large spread decreases since the prior issuance. Everglades Re 2013 closed at almost half the multiple of expected loss of the 2012 issuance. Table 3: First Quarter 2013 Catastrophe Bond Issuance Beneficiary
Aetna Life Insurance
Issuer
Vitality Re IV Limited
Class
Size (millions)
Covered Perils
Trigger
Class A
$105.0
Health
Indemnity (MBR)
Class B
$45.0
Health
Indemnity (MBR)
$270.0
US HU, EQ
Indemnity
MMF
$250.0
FL HU
Indemnity
MMF
Series 2013-1
Nationwide Mutual
Caelus Re 2013 Limited
Series 2013-1
Class A
Florida Citizens
Everglades Re Ltd.
Series 2013-1
Class A
Total Closed During Q1 2013
Source: Aon Benfield Securities
10
Series
Collateral
MMF
$670.0 Legend FL – Florida US – United States
EQ – Earthquake HU – Hurricane
Aon Benfield Securities
Second Quarter 2013 The second quarter of 2013 was a very active period, during which 13 transactions closed bringing a total of $3.3 billion of new issuance. Transactions included: • M erna Re IV Ltd. (Merna Re IV), State Farm Fire and Casualty Company's (State Farm) fifth catastrophe bond issuance, provides coverage against earthquakes in the New Madrid region on an indemnity basis. The $300 million transaction closed at the low end of marketed price guidance and achieved the lowest absolute spread in five years. • S anders Re Ltd. (Sanders Re), Allstate’s first issuance since 2008, provides coverage against hurricanes and earthquake across two classes of notes. The industry index transaction was upsized to $350 million, with each class closing below initial marketed price guidance. Additionally, the transaction achieved the lowest absolute spreads for hurricane capacity since 2008. • A rmor Re Ltd. is the first issuance from American Coastal Insurance Company (America Coastal), which writes commercial residential property insurance in Florida. The transaction provides American Coastal with $183 million in coverage against Florida hurricanes for one season. Table 4: Second Quarter 2013 Catastrophe Bond Issuance Beneficiary State Farm
Issuer
Series
Class
Merna Re IV Ltd.
Issue Size (millions)
Covered Perils
Trigger
Collateral
$300.0
New Madrid EQ
Indemnity
MMF
Nationwide Mutual
Caelus Re 2013 Limited
Series 2013-2
Class A
$320.0
US HU, EQ
Indemnity
MMF
North Carolina JUA/IUA
Tar Heel Re Ltd.
Series 2013-1
Class A
$500.0
NC HU
Indemnity
MMF
Turkish Catastrophe Insurance Pool
Bosphorus 1 Re Ltd.
Series 2013-1
Class A
$400.0
Turkey EQ
Parametric Index
MMF
Allstate
Sanders Re Ltd.
Series 2013-1
Class A
$200.0
Class B
$150.0
US HU, EQ
Industry Index
MMF
Louisiana Citizens
Pelican Re Ltd.
Series 2013-1
Class A
$140.0
LA HU
Indemnity
MMF
American Coastal
Armor Re Ltd.
Series 2013-1
Class A
$183.0
FL HU
Indemnity
MMF
The Travelers Indemnity Company
Long Point Re III Ltd.
Series 2013-1
Class A
$300.0
Northeast HU
Indemnity
MMF
Allianz Argos 14 GmbH
Blue Danube II Ltd.
Series 2013-1
Class A
$175.0
US, CB, MX HU & US, CAN EQ
Industry Index
IBRD Notes
USAA
Residential Reinsurance 2013 Limited
Series 2013-I
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
Assurant, Inc.
Ibis Re II Ltd.
Series 2013-1
US HU
Industry Index
MMF
$75.0
US HU, AUS CY
Industry Index, Modeled Loss
MMF
$75.0
US, CAN EQ
Industry Index
MMF
Munich Re
Queen Street VIII Re Limited
Amlin AG
Tramline Re II Ltd.
Total Closed During Q2 2013
Source: Aon Benfield Securities
Series 2013-1
Class 3
$95.0
Class 11
$205.0
Class A
$110.0
Class B
$35.0
Class C
$40.0
Class A
$3,303.0 Legend AUS – Australia CAL – California CAN – Canada CB – Caribbean FL – Florida
LA – Louisiana MX – Mexico NC – North Carolina US – United States CY – Cyclone
EQ – Earthquake HU – Hurricane ST – Severe Thunderstorm WF – Wildfire WS – Winter Storm
11
Insurance-Linked Securities 2013
The first half of 2013 produced a total of $4.0 billion1 in new issuance (Figure 4), an increase of $400 million over the first half of 2012, and the highest first half issuance level since 2007. Figure 4: Catastrophe Bond Issuance by Half-Year 9,000
January - June July - December
8,000
USD Millions
7,000
3,404
6,000 5,000
2,692 2,625
4,000
2,842
3,000 4,976
320
2,011
2,000 1,000 0
2008
3,973
2012
2013
1,757
1,460
2007
3,588 2,650
2,510
2009
2010
2011
Source: Aon Benfield Securities
Outlook As of August 23, new catastrophe bond issuance for the third quarter of 2013 had already reached $1.1 billion. This represents, and may ultimately exceed, the highest level of issuance during a third quarter since 2007, which included State Farm's $1.2 billion Merna Reinsurance Ltd., the largest ever single catastrophe bond issuance. Repeat and, increasingly, new sponsors are accessing the ILS market to leverage the favorable market conditions. There is strong demand for catastrophe bonds for the remainder of the 2013 calendar year, with investors seeking to deploy capital. Conditions remain positive for the catastrophe bond market, with 2013 issuance on track to reach $7.0 to $8.0 billion in total.
1
12
Excludes cat bond lite transactions
Aon Benfield Securities
ILS Investor Activity Capacity Providers Figure 5: Investor by Category (Years ending June 30)2 2%
2%
Catastrophe Fund Institutional
12%
5%
5%
5%
Mutual Fund Hedge Fund Reinsurer
43% 41%
51% 34%
2013
2012
Source: Aon Benfield Securities
The potential effects of the recent record capital inflows to the ILS market have been heavily discussed. Strong investor demand for insurance risks has resulted in more competitive ILS pricing in comparison to the traditional reinsurance product, which in turn has encouraged sponsors to bring more issuances to market. More than ever, cedents are choosing to incorporate ILS into their overall risk transfer programs. Over the year ending June 30, 2013 cat funds remained the leading source of ILS capacity. Cat funds’ participation, however, decreased to 43 percent for the year ending June 30, 2013, from 51 percent for the prior year period. Participation from hedge funds and reinsurers also declined in the period, each falling to just two percent in 2013, from five percent in the 2012 period. Of note, ILS spreads were more competitive than ever with traditional reinsurance rates. As such, the decreasing capacity from hedge funds and reinsurers is not surprising. The strong inflows to the sector far outweighed the reduced capacity from these two groups which, over the past three years have contributed less than eight percent to total catastrophe bond capacity for the period. As initially stated in last year’s report, Insurance-Linked Securities: Evolving Strength 2012, we still see mutual funds as a future source for increased direct participation in the ILS sector. In the past year, Stone Ridge Asset Management LLC was formed (“Stone Ridge”) to become the first reinsurance-focused mutual fund. Stone Ridge helped to increase mutual fund contribution to ILS capacity to 12 percent in 2013 — up from five percent in 2012. Institutional investors also increased their participation in the sector, ending the period at 41 percent of total catastrophe bond capacity. This contribution is up from 34 percent for the period ending June 30, 2012.
Aon Benfield Securities’ analyses of investor category and geographic attributes include only those transactions in which the firm participated
2
13
Insurance-Linked Securities 2013
Capital Origins The majority of capital for ILS continues to come from U.S. investors. U.S. participation remained relatively stable at 44 percent in 2013, compared to 46 percent in 2012. Participation from Bermuda continued to decline to 14 percent in 2013 from 19 percent in 2012. This represents a decrease of more than 50 percent for Bermuda reinsurers from 2011 levels. Switzerland and the UK both saw notable increases in participation in 2013 from the prior year. Figure 6: Investor by Country/Region (Years ending June 30)3 U.S. Bermuda
9% 8%
Switzerland UK Other
11% 5% 44%
25%
14%
2013
46% 19%
19%
2012
Source: Aon Benfield Securities
General Market Trends Third Quarter 2012 Most investors had their portfolios in place during the third quarter, and as U.S. hurricane season approached they prepared to watch how it would progress. Investors were also able to secure several non-U.S. hurricane-exposed new transactions; Swiss Re brought to market two classes of its extreme mortality series through Vita Capital V Ltd. The notes were upsized from an initial launch of $100 million to $275 million, with both classes closing at the low end of marketed price guidance. The CEA secured $300 million in capacity via Embarcadero Re, double the marketed transaction size. The last transaction to come to the market in the quarter was Hannover Re’s Eurus III. The transaction closed below the marketed price guidance and was upsized due to investor demand. Eurus III also set a new pricing benchmark for standalone Europe windstorm risk, highlighting investor demand for non-U.S. exposures. Price increases were strong throughout the third quarter as it appeared the hurricane season would be less active than the historical average. Towards the end of the quarter, investors began to add positions with the expectation that prices would rise as the season was deemed loss-free. Demand for non-U.S. risks remained strong throughout the quarter.
Aon Benfield Securities’ analyses of investor category and geographic attributes include only those transactions in which the firm participated
3
14
Aon Benfield Securities
Fourth Quarter 2012 Building on the momentum of third quarter issuances, several more diversifying transactions were issued during the fourth quarter. Issuances included both Mexico and Europe windstorm risks. The secondary market began the fourth quarter with many investors paying premiums to secure bonds. In October, U.S. hurricane bonds on their final risk season began trading at levels reflecting many investors’ views that the season would end without a loss. Superstorm Sandy impacted the northeastern U.S. on October 29, after devastating parts of the Caribbean the week prior. This led to broad price decreases. U.S. hurricane bonds decreased 4.1 percent between October 19 and November 16, while U.S. multi-peril bonds decreased 7.9 percent over the same period. On November 21, PCS released a preliminary estimate of insured industry property damage from Sandy of $11 billion. This was at the low end of many investors' initial expectations, and secondary prices decreased to a lesser extent for the remainder of the quarter. U.S. hurricane bonds decreased 1.9 percent and U.S. multi-peril bonds decreased 3.8 percent between October 19 and December 31. By the close of 2012, no catastrophe bonds had been impaired due to Sandy. The table below outlines the effect of Sandy on several select bonds' secondary market pricing during the fourth quarter. Table 5: Superstorm Sandy's Impact on Select Cat Bond Secondary Prices Transaction
Peril(s)
Trigger
Price (10/19/2012)
Price (11/16/2012)
Price (12/31/2012)
Successor X V-F4
U.S. Hurricane
Industry Index
98.01
25.00
75.00
Long Point Re III 2012
Northeast U.S. Hurricane
Indemnity
100.73
92.50
100.22
East Lane Re IV B
Northeast All Natural Perils
Indemnity
103.48
75.00
98.47
Mystic Re III B
U.S. Hurricane, U.S. Earthquake
Indemnity
107.19
90.00
99.81
Source: Aon Benfield Securities
Long Point Re III Ltd. Series 2012-1 (Long Point Re III 2012), East Lane Re IV Ltd. Series 2011-I Class B (East Lane Re IV B) and Mystic Re III Ltd. Series 2012-1 Class B (Mystic Re III B), which utilize indemnity triggers, are sponsored by insurers with heavy exposure to the northeast. All three of these classes of notes recouped the majority of their initial mark-to-market losses by year-end (Table 5). The Successor X Ltd. Series 2011-3 Class V-F4 (Successor X V-F4) transaction, however, utilizes an industry index trigger and has a relatively high modeled probability of attachment. This transaction continued to trade at a discount at year end 2012, reflecting the likelihood of impairment if the PCS estimate were to increase significantly.
15
Insurance-Linked Securities 2013
Repeat sponsor United Services Automobile Association (USAA) was the first to come to market post-Sandy with a subsequent issuance from Residential Reinsurance 2012 Limited. The transaction was significantly upsized and the two classes also closed below marketed price guidance. Additionally, Compass Re Ltd. Series 2012-1 secured significant capacity consistent with pre-Sandy spreads. Secondary trading in the fourth quarter has historically been active as investors rebalance their portfolios. In 2012, most investors had ample capital to participate in all primary issuances without having to make substantial portfolio changes. Additionally, trading throughout the quarter was relatively one-sided. More market participants were looking to purchase rather than sell bonds. One exception was in short-dated U.S. earthquake-exposed transactions, where there were more sellers than buyers. As the fourth quarter closed, investors had excess capacity and were anticipating an active 2013.
First Quarter 2013 On January 18, PCS released a re-survey estimate of insured industry property damage for Sandy, revising the estimate from $11.00 billion to $18.75 billion. The calculated event index value for the Successor X V-F4 bonds was just below the attachment level. As such, the bonds were marked down to a bid price of 50. Table 6: Superstorm Sandy Industry Insured Loss Estimates AIR4
EQE 5
RMS6
PCS7
Impact Forecasting8
USD16 – 22
USD10 - 20
USD20 - 25
USD18.75
USD28.2
PCS released a second re-survey estimate on March 22, 2013. The total insured industry loss estimate remained unchanged at $18.75 billion, with increases in Connecticut, New York, Pennsylvania and West Virginia offset by decreases in Maryland and Virginia. The Successor X-F4 bonds ended the first quarter of 2013 marked at a bid price of 65, as investors remained cautious that any further increase in the PCS insured industry loss estimate would likely impact the transaction. Primary issuance for property catastrophe bonds began a little later than typical in 2013, forcing capital inflows to sit idle. Caelus Re 2013-1 was the first property catastrophe bond marketed in 2013, and benefited from a market with surplus capital. As a result, Caelus Re 2013-1 received broad market support. The transaction closed in March at a level reflecting an estimated 40 percent spread decrease from the fourth quarter of 2012. This set the tone for transactions that soon followed. One such transaction, Everglades Re 2013 closed at an interest spread of 10 percent. This represented a significant decrease from the Everglades Re 2012 interest spread of 17.75 percent, despite having a higher expected loss.
4
16
AIR Worldwide Corporation ("AIR") as of November 26, 2012
5
EQECAT, Inc. ("EQE") as of November 1, 2012
6
Risk Management Solutions, Inc. ("RMS") as of November 14, 2012
7
PCS as of March 22, 2013
8
Impact Forecasting’s Annual Global Climate and Catastrophe Report: 2012
Aon Benfield Securities
Given the later start to primary market issuance during the first quarter, investors looked to the secondary market for additions to their portfolios. Despite some reluctance from sellers, investors could secure positions in the secondary market for a premium. Investor demand for ILS products led to strong mark-to-market gains throughout the first quarter. The Aon Benfield All Bond Index increased by 3.1 percent — a notable increase since U.S. hurricane seasonality typically reduces absolute spread levels during the first half of the year. At the midpoint of the first quarter, secondary market trading slowed as investors’ focus shifted to the primary issuances in the market.
Second Quarter 2013 Unprecedented demand for catastrophe bonds continued into the second quarter of 2013, with new issuance for the first half of 2013 totaling $4.0 billion — the largest issuance figure since the first half of 2007, where almost $5.0 billion of new catastrophe bonds closed. Despite such an active quarter, investor capital kept pace with primary market issuance. Many transactions were upsized, and oversubscription for issuances allowed a number of transactions to close at or below the low end of marketed price guidance. Investors continued to find catastrophe bonds attractive throughout the second quarter, despite the ongoing decrease in interest spread levels relative to 2012. In many cases, the ILS market offered collateralized, multi-year protection at more aggressive levels than traditional reinsurance markets. The demand for ILS had a ripple effect across the traditional markets. Sponsors benefitted from the competition between reinsurers and alternative forms of capital, including catastrophe bonds and collateralized reinsurance. Interest spreads remained competitive throughout the second quarter with some stabilization seen towards the end of the period. Over 75 percent of the catastrophe bond limit placed in the quarter was exposed to U.S. hurricanes. New transactions with hurricane exposure continued to come to market, despite the onset of the U.S. hurricane season. Three non-U.S. hurricane-exposed bonds came to the market in the second quarter. These were also the lowest yielding bonds of the period. Minimum pricing was tested with State Farm’s Merna Re IV, covering New Madrid earthquake, and the Turkish Catastrophe Insurance Pool’s Bosphorus 1 Re Ltd., covering Turkey earthquake. Both transactions priced at 2.50 percent, the lowest absolute spread in five years. Additionally, Amlin’s Tramline Re II Ltd., covering U.S. and Canada earthquake, secured $75 million at 3.25 percent. As minimum interest spread thresholds decreased, many sponsors found it attractive to issue catastrophe bonds for the more remote layers of their risk transfer programs. No transaction brought to market during the second quarter had a double-digit interest spread. This led to stronger investor demand for higher yielding bonds.
17
Insurance-Linked Securities 2013
In the secondary market, several investors began to take profits by selling recently issued bonds at a premium after a very short period of holding the securities. Many bonds issued in the second quarter were almost instantly trading at premium levels in the secondary market. As the quarter closed, sellers entered the secondary market to release capacity for new issuances and rebalance portfolios after an active period for ILS and the collateralized markets.
Outlook Despite declines in ILS spreads, we continue to see new capital flowing into the market on a direct and indirect basis. Aon Benfield Securities believes that these investors are long term in nature and will tend to stay invested even if interest rates improve in traditional investments. Spread levels achieved in the first half of 2013 are expected to continue for the remainder of the year and into 2014. The willingness of ILS investors to broaden the risks available for securitization has already brought new interest from sponsors in ILS market initiatives. We expect the market will continue to broaden the scope of coverage beyond vanilla natural catastrophe risks, and find innovative ways to utilize the fresh new capital sources. We anticipate an active remainder of 2013 for new issuances that could rival the record set in 2007.
18
Aon Benfield Securities
The Aon Benfield ILS Indices The Aon Benfield ILS Indices are calculated by Thomson Reuters using month-end price data provided by Aon Benfield Securities. Table 7: Aon Benfield ILS Indices9 Return for Annual Period Ending June 30
Index Title Aon Benfield ILS Indices
5 yr Avg Annual Return
10 yr Avg Annual Return
2013
2012
2008-2013
2003-2013
All Bond Bloomberg Ticker (AONCILS)
12.14%
7.36%
8.41%
8.23%
BB-rated Bond Bloomberg Ticker (AONCBB)
8.16%
7.90%
7.17%
7.04%
U.S. Hurricane Bond Bloomberg Ticker (AONCUSHU)
13.19%
7.60%
9.10%
9.27%
U.S. Earthquake Bond Bloomberg Ticker (AONCUSEQ)
6.89%
4.37%
5.48%
6.59%
Benchmarks 3-5 Year U.S. Treasury Notes
-0.61%
4.61%
4.22%
3.88%
3-Year U.S. Corporate BB
4.06%
6.27%
8.21%
6.83%
S&P 500
17.92%
3.14%
4.64%
5.12%
ABS 3-5 Year, Fixed Rate
1.55%
5.90%
5.91%
3.72%
CMBS Fixed Rate 3-5 Year
4.73%
8.41%
9.28%
6.29%
On an annual basis, through June 30, 2013, all Aon Benfield ILS Indices posted gains. The Aon Benfield All Bond and BB-rated Bond Indices posted returns of 12.14 percent and 8.16 percent, respectively. The U.S. Hurricane and U.S. Earthquake Bond Indices returned 13.19 percent and 6.89 percent, respectively. Each bond index benefitted from strong mark-to-market gains, especially throughout the first half of 2013 as investor demand drove spreads to historically low levels. On an annual basis, each Aon Benfield ILS Index outperformed comparable fixed income benchmarks; however, they did not outperform the S&P 500 index.
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.
9
The 3-Year U.S. Corporate BB Index is calculated by Bloomberg and simulates the performance of corporate bonds rated BB on a zero coupon basis. Zero coupon yields are derived by stripping the par coupon curve. The maturities of the BB rated bonds in this index are three years. 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 Bank of America Merrill Lynch (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 Fixed Rate 3-5 Year 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 which 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 table has been compiled from sources believed to be accurate, Aon Benfield Securities makes no representation or warranty as to the accuracy of such information, as such information should not be relied upon in making investment or other decisions. Past performance is no guarantee of future results.
19
Insurance-Linked Securities 2013
The 10-year average annual return of the Aon Benfield All Bond Index was again superior to other benchmark returns. This demonstrates the value of a diversified book of pure insurance risks for long term investors, who continue to value the asset class as a true alternative. For the annual period to June 30, 2013 the market continued to expand as institutional investors allocated additional capital to ILS products. The past year has been a watershed moment for the ILS market, as pricing came in line with, and in many cases was lower than traditional reinsurance. Aon Benfield expects the market conditions seen in the period under review to persist for the remainder of 2013, absent a large catastrophe event. This will have a negative effect on the index values, as new bonds will close at reduced spreads, and existing bonds have already experienced significant mark-to-market gains as they repriced to new levels. Despite these market dynamics, the ILS return profile relative to other fixed income markets is expected to remain strong into 2014. The diversifying nature of ILS, along with the low correlation of ILS to other markets, should entice investors to deploy additional capital even as the rates on new issuances and yields on existing bonds fall below the norms of previous years. Figure 7: Aon Benfield All Bond Indices versus Financial Benchmarks 140% 120%
CMBS Fixed Rate 3-5 Yrs
100%
ABS 3-5 Yrs, Fixed Rate
80%
S&P 500
Total Return
All Bond 3 Year U.S. Corporate BB+
60% 40% 20% 0% -20% -40%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Aon Benfield Securities, Bloomberg
20
Aon Benfield Securities
Figure 8: Historical Performance of Aon Benfield ILS Indices All Bond
140%
U.S. Hurricane BB-rated
120%
U.S. EQ
Total Return
100% 80% 60% 40% 20% 0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Aon Benfield Securities
21
Insurance-Linked Securities 2013
ILS-Related Markets Sidecar Market Review A number of new sidecars were launched by first time sponsors for the 2013 reinsurance renewal season, along with a series of additional capital raises and renewals for existing sidecars. Despite losses from Superstorm Sandy and the drought-driven U.S. crop losses, the 2013 reinsurance renewal season did not experience noticeable capacity shortfalls. Sponsors subsequently marketed sidecars to a different class of investor than have traditionally predominated in the class, with certain sponsors offering a more diverse risk profile. Table 8: Sidecars Launched During 12 Months to June 30, 2013 Sidecar
Principal Sponsor
Inception
Line of Business
Saltire Re I
Lancashire Re
Nov-12
Combined exposure UNL aggregate reinsurance product
New Point Re V
Alterra Capital
Dec-12
Property cat retrocessional
Size (millions) $250 $37
Upsilon Re II
RenaissanceRe
Jan-13
Worldwide aggregate retrocessional reinsurance
Harambee Re
Argo Group
Jan-13
Portfolio for both insurance and reinsurance
AlphaCat Re 2013
Validus
Jan-13
Worldwide property catastrophe reinsurance and retrocession
$230
Mt. Logan Re
Everest Re
Jan-13
Worldwide property catastrophe reinsurance
$250
Lorenz Re
PartnerRe
Mar-13
Worldwide property catastrophe reinsurance for select accounts
$75
Altair Re
ACE
Apr-13
Worldwide property catastrophe insurance and reinsurance
$95
Total
$185 N/A
$1,122
Source: Aon Benfield Securities, company press releases
The reinsurance sector continued to see a gradual trend in companies diversifying their revenue streams and capital structure as they sought to respond to the increased profile of the wider ILS asset class among institutional investors. This shift in capital served to encourage sponsors to launch sidecars and accounted for a number of new launches in the first half of 2013. In addition, over the last 12 months, a number of reinsurers have increased their efforts to raise third party capital, including Validus Re and Montpelier Re, among others.
22
Aon Benfield Securities
Figure 9: Form of Transaction ILW Sidecar
100%
Collateralized Re Cat Bonds
95%
Traditional UNL
90%
85%
80%
75%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD
Source: Aon Benfield Securities
As illustrated in Figure 9, the perception and attraction of non-equity reinsurance investments led to increased capacity provided by collateralized markets within the property catastrophe markets during the 12 months under review.
23
Insurance-Linked Securities 2013
Industry Loss Warranty (ILW) Review ILW trading for the first half of 2013 was relatively robust, comprising the traditional peaks in the first quarter and a seasonal increase as U.S. hurricane season approached. Trading volumes reduced year-on-year by an estimated 15 to 20 percent, coinciding with meaningful price reductions across all territories and perils, and resulting in reduced budgets and reduced spend. Figure 10 below illustrates how pricing on U.S. All Natural Peril deals continued to come under pressure during the first half of 2013. This is partly due to additional capacity, particularly for U.S. hurricane and specifically Florida, but also due to the wider macro conditions being experienced in the reinsurance market. Figure 10: Total U.S. ILW Trade Volume and Price Movement since 2011 1,400
$30bn ANP
120
1,200
100
1,000
$50bn ANP $80bn ANP Original Q3/4 Forecast
Price Movement by Quarter
140
80
800
60
600
40
400
20
200
1
Q
4
Q
3
Q
2
Q
1
Q
4
Q
3
Q
2
Q
1
Q
Source: Aon Benfield Securities
Interest in structured ILWs remained strong by June 30, 2013 with many buyers opting for region-specific weighted solutions; however, the inherent basis risk prevalent in these structures remained a concern for many buyers. As a result, basis risk wraps became more commonplace to cover post event shortfalls.
24
0
4 st /Q ca 3 re Q Fo 013 2 2 Q
13
20
13
20
12
20
12
20
12
20
12
20
11
20
11
20
11
20
11
20
0
Total U.S. Trade Volume (USD Millions)
Total U.S. Trade Volume
Aon Benfield Securities
U.S. Perils In 12 months to June 30, 2013 many issuances that covered U.S. perils were brought to market by both new and repeat sponsors. In the second half of 2012, eight transactions closed covering U.S. perils (Table 9) – many at the low end of marketed price guidance or below. This was an early signal of the spread declines the market would experience in the months to follow. Table 9: Second Half 2012 ILS Transactions Covering U.S. Perils Beneficiary
Issuer
Munich Re
Queen Street VI Re Limited
CEA
Embarcadero Reinsurance Ltd.
Munich Re
Queen Street VII Re Limited
SCOR
Atlas Reinsurance VII Limited
Swiss Re
Mythen Re Ltd.
USAA
Residential Reinsurance 2012 Limited
AIG
Compass Re Ltd.
Zurich
Lakeside Re III Ltd.
Source: Aon Benfield Securities
Series
Series 2012-II
Series 2012-2
Series 2012-II
Series 2012-1
Class
Size (millions)
Covered Perils
Trigger
Rating
Expected Loss10
Interest Spread
$100
US HU, EU Wind
Industry Index
B
2.91%
10.35%
$300
CAL EQ
Indemnity
BB+
0.78%
5.0%
$75
US HU, EU Wind
Industry Index
B
2.87%
8.60%
Class A
$60
US HU, EQ
Industry Index
BB-
1.89%
8.00%
Class A
$120
US HU, UK Mortality
B+
2.20%
8.50%
Class C
$80
US HU
B-
4.28%
11.75%
Class 1
$155
BB+
0.48%
4.50%
Class 2
$70
BB
0.91%
5.75%
Not Rated
3.67%
12.75%
Not Rated
7.61%
19.00%
Class A
US HU, EQ, ST, WS, CAL WF
Industry Index
Indemnity
Class 3
$95
Class 4
$80
Class 1
$400
US HU, EQ
Industry Index
Not Rated
4.14%
14.25%
$270
US, CAN EQ
Indemnity
B+
2.04%
8.00%
Legend CAL – California CAN – Canada EU – Europe EQ – Earthquake HU – Hurricane
ST – Severe Thunderstorm WF – Wildfire WS – Winter Storm UK – United Kingdom US – United States
In the second half of 2012, transactions comprised regular market participants including Munich Re, which sponsored two issuances with a combined total capacity of $175 million for U.S. hurricane and Europe windstorm. USAA continued its semi-annual issuance strategy. The insurer secured $400 million in protection against U.S. hurricanes, earthquakes, severe thunderstorms, winter storms and wildfires across four classes of notes.
Annualized modeled expected losses; sensitivity cases are used if U.S. hurricane is covered.
10
25
Insurance-Linked Securities 2013
Repeat sponsor AIG returned to the catastrophe bond market with a second issuance from Compass Re Ltd. The Series 2012-1 transaction provides $400 million in coverage against U.S. hurricanes and earthquakes. The industry index transaction was initially marketed and sold to select investors. Lakeside Re III Ltd. (Lakeside Re III) was the final transaction to close in the calendar year 2012. The Zurich-sponsored transaction, which replaced the maturing Lakeside Re II Ltd., expanded the covered area to include earthquakes from Canada as well as the U.S. The $270 million transaction provides Zurich with annual aggregate coverage over three years on an indemnity basis. Meanwhile, 14 transactions covering U.S. perils closed during the first half of 2013 (Table 10). Table 10: First Half 2013 ILS Transactions Covering U.S. Perils Issuer
Series
Class
Size (millions)
Nationwide Mutual
Caelus Re 2013 Limited
Series 2013-1
Class A
$270
US HU, EQ
Indemnity
BB-
1.42%
5.25%
Florida Citizens
Everglades Re Ltd.
Series 2013-1
Class A
$250
FL HU
Indemnity
B
3.18%
10.00%
State Farm
Merna Re IV Ltd.
$300
New Madrid EQ
Indemnity
Not Rated
0.39%
2.50%
Nationwide Mutual
Caelus Re 2013 Limited
Series 2013-2
Class A
$320
US HU, EQ
Indemnity
Not Rated
1.92%
6.85%
North Carolina JUA/IUA
Tar Heel Re Ltd.
Series 2013-1
Class A
$500
NC HU
Indemnity
B+
2.77%
8.50%
Allstate
Sanders Re Ltd.
Series 2013-1
Class A
$200
0.95%
3.50%
$150
Industry Index
BB+
Class B
US HU, EQ
BB
1.22%
4.00%
Louisiana Citizens
Pelican Re Ltd.
Series 2013-1
Class A
$140
LA HU
Indemnity
Not Rated
2.05%
6.00%
American Coastal
Armor Re Ltd.
Series 2013-1
Class A
$183
FL HU
Indemnity
BB+
0.40%
4.25%
Travelers
Long Point Re III Ltd.
Series 2013-1
Class A
$300
Northeast HU
Indemnity
BB
1.24%
4.00%
Allianz Argos 14 GmbH
Blue Danube II Ltd.
Series 2013-1
Class A
$175
US, CB, MX HU & US, CAN EQ
Industry Index
BB+
0.96%
4.25%
USAA
Residential Reinsurance 2013 Limited
Series 2013-I
Class 3
$95
3.68%
9.25%
$205
Indemnity
B-
Class 11
US HU, EQ, ST, WS, CAL WF
Not Rated
2.60%
8.00%
BB+
0.85%
4.00%
Assurant, Inc.
Ibis Re II Ltd.
Series 2013-1
US HU
Industry Index
BB-
1.53%
4.50%
B
3.36%
8.00%
Munich Re
Queen Street VIII Re Limited
$75
US HU, AUS CY
Industry Index, Modeled Loss
Not Rated
2.92%
6.50%
Amlin AG
Tramline Re II Ltd.
$75
US, CAN EQ
Industry Index
Not Rated
1.21%
3.25%
Beneficiary
Source: Aon Benfield Securities
11
26
Series 2013-1
Class A
$110
Class B
$35
Class C
$40
Class A
Covered Perils
Legend AUS – Australia CAL – California CAN – Canada CB – Caribbean FL – Florida
Annualized modeled expected losses; sensitivity cases if U.S hurricane is covered.
Trigger
Rating
LA – Louisiana MX – Mexico NC – North Carolina US – United States CY – Cyclone
Expected Interest Loss11 Spread
EQ – Earthquake HU – Hurricane ST – Severe Thunderstorm WF – Wildfire WS – Winter Storm
Aon Benfield Securities
Nationwide Mutual’s Caelus Re 2013-1 was the first U.S. perils transaction to market in 2013, benefitting from significant spread declines of around 40 percent since the fourth quarter of 2012. Several weeks after Caelus 2013-1 closed, the firm entered the market with a second series, Caelus 2013-2. In total, Nationwide Mutual secured $590 million in coverage against U.S. hurricanes and earthquakes across the two issuances. Louisiana Citizens returned to the market with its second issuance from Pelican Re Ltd. The $140 million transaction provides the insurer of last resort with coverage against U.S. hurricanes for four years. The transaction also allows flexibility at reset for the insurer, which may adjust the attachment level and pay a commensurate adjusted interest spread. Assurant, Inc. issued a subsequent series from the Ibis Re II Ltd. program, successfully securing $185 million in coverage against U.S. hurricanes. The index transaction utilizes county-weighted insured industry personal losses as reported in Verisk Catastrophe Index Reports. Meanwhile, new benchmarks were set for minimum absolute spread levels during the first half of 2013. State Farm’s Merna Re IV closed with an interest spread of 2.50 percent, the lowest spread for any transaction in five years. Additionally, Allstate returned to the market for the first time since 2008 with Sanders Re. The Class A notes closed at a spread of 3.50 percent. This represents the lowest spread for a U.S. hurricane transaction in five years.
Superstorm Sandy12 Prior to making landfall in the U.S., Sandy began to lose its tropical characteristics and was downgraded by the National Hurricane Center (NHC) to a post-tropical cyclone. The system came ashore in the U.S. near Brigantine, New Jersey on October 29 with 80 mph (130 kph) sustained winds that were also accompanied by record storm tide heights (the combination of storm surge and astronomical tide). The overall impact in the U.S. was extensive, as Sandy damaged or destroyed at least 650,000 housing units and 250,500 insured vehicles. More than 300,000 business properties were also affected. Catastrophic impacts to residential, commercial and governmental property were felt along the New Jersey, New York and Connecticut coastlines, where water inundation heights approached 10 feet (3 meters). Roughly 9.1 million customers lost electricity in the U.S. Impact Forecasting, Aon Benfield’s catastrophe model development center of excellence, noted during its damage survey in New York and New Jersey that Sandy’s record storm surge and excessive wave heights were the predominant cause of damage, as opposed to wind. Outside of the U.S., Sandy caused significant damage in eastern Cuba, particularly the city of Santiago de Cuba, as approximately 300,000 homes and other buildings were damaged or destroyed. An additional 75,000 homes and other structures were damaged in Hispaniola, Jamaica, the Bahamas and eastern Canada in addition to power outages and impacts to agriculture and infrastructure.
12
Impact Forecasting's "Hurricane Sandy Event Recap Report" dated May 14, 2013
27
Insurance-Linked Securities 2013
Sandy also highlighted complexities involving hurricane deductible triggers. Most insurance policies cite the issuance of tropical cyclone-based watches and warnings as a requirement for the deductible to activate. Some policies in the U.S. Northeast also mandate Category 2 wind speeds to be measured for the trigger to be initiated. In the case of Sandy, the NHC never issued tropical cyclone-based watches and warnings north of North Carolina due to its anticipated post-tropical transition before landfall. From a catastrophe modeling point of view, the primary lesson from Sandy is that not every simulated event may trigger hurricane deductibles. This is especially true given the non-uniform and wide range of deductible triggers that different states require. Additionally, Sandy was a highly challenging storm for modelers, who did not have a similar historical or stochastic event to replicate the storm’s size and track. In July, Property Claim Services (PCS) released the final insured industry loss estimate for Sandy. After several resurveys, PCS’s estimate remained unchanged at $18.75 billion.
Model Updates In the summer of 2013, catastrophe modeling firm Risk Management Solutions, Inc. (RMS) released RiskLink 13.0. The updated model includes a new medium-term rate (MTR) forecast for hurricane activity in the North Atlantic between 2013 and 2017. For the 2013 MTR update, RMS added three additional years of HURDAT data to the forecast input since the 2011 forecast was completed. Additional storms incorporated included Irene, Isaac and Sandy. In the medium term, RMS expects hurricane activity will remain above the long-term average, particularly for category 3, 4 and 5 storms. RMS research shows differences in where hurricanes form and track under warm SST conditions compared to cooler SST conditions. RMS expects that increased hurricane formation in the coming years will not translate directly into a proportional increase in landfalls; the 2013 MTR forecast is thus closer to the long-term historical average than the 2011 MTR forecast13. In June, catastrophe modeling firm AIR Worldwide Corporation (AIR) released an updated version of its hurricane model, which incorporates the 2011 update of NOAA’s Atlantic basin hurricane database. The update includes storms through 2010, and reanalysis of data through 1930. AIR also released an updated industry exposure database. AIR estimates that 38 percent of the total exposure in coastal states is currently located in coastal counties of hurricane states, which in turn account for 16 percent of the total value of properties in the entire U.S.14
28
13
R MS's white paper "2013 Medium-Term Rate Forecast for the North Atlantic Basin" (dated March 11, 2013)
14
IR press release dated June 25, 2013 and AIR's "The Coastline at Risk: 2013 Update to the Estimated Insurance Value of U.S. Coastal A Properties."
Aon Benfield Securities
Europe Perils During the 12-month period ending June 30, 2013, a total of five property catastrophe bonds covering Europe perils were issued, compared to the 10 deals which closed in the prior year period. The most frequent Europe sponsors continue to be the large reinsurers, with Munich Re and Swiss Re issuing three and two catastrophe bonds, respectively, in the 12 months under review. In September 2012, Hannover Re returned to the market and secured €100 million in Europe windstorm capacity via Eurus III. This was the first standalone Europe windstorm deal of the year and utilized a PERILS trigger. The deal was upsized and closed below the marketed price guidance. Proceeds from the sale are invested in European Bank for Reconstruction and Development (EBRD) medium term notes. In November 2012, SCOR came to market with a catastrophe bond issuance from the first Solvency II compliant Special Purpose Reinsurance Vehicle, Atlas Reinsurance VII Limited. The transaction provides SCOR with €130 million of protection against Europe windstorm and $60 million of protection against U.S. hurricane and earthquake events over three years. Mythen Re 2012-2, sponsored by Swiss Re, raised $200 million in capacity across two classes of notes. Class A covers both U.S. hurricane and UK extreme mortality, and is the first deal to comprise property catastrophe and extreme mortality protection in a single tranche. During the period, one new Europe sponsor entered the ILS market, the Turkish Catastrophe Insurance Pool (TCIP). Bosphorus I Re Ltd. was the largest standalone deal for a Europe sponsor in the past 12 months, and provides TCIP with $400 million in coverage for Turkey earthquake. Amlin AG returned to the market and raised $75 million through Tramline Re II Ltd., an industry index transaction that provides cover for both U.S. and Canada earthquake.
29
Insurance-Linked Securities 2013
Table 11: Catastrophe Bond Transactions Covering Europe Perils Beneficiary Munich Re
Issuer
Series
Size (millions)
Covered Perils
Trigger
Collateral
$100.0
US HU, EU Wind
Industry Index
MMF
€100.0
EU Wind
Industry Index
EBRD Notes
$75.0
US HU, EU Wind
Industry Index
MMF
Class B
€130.0
EU Wind
Industry Index
EBRD Notes
Class A
$400.0
Turkey EQ
Parametric Index
MMF
Class
Queen Street VI Re Limited
Hannover Re
Eurus III Ltd.
Munich Re
Queen Street VII Re Limited
SCOR
Atlas Reinsurance VII Limited
Turkish Catastrophe Insurance Pool
Bosphorus 1 Re Ltd.
Source: Aon Benfield Securities
Series 2012-1
Series 2013-1
Class A
Legend EU – Europe US – United States
EQ – Earthquake HU – Hurricane
Collateral In the 12 months to June 30, 2013, the lack of choice for a suitable collateral solution for Euro-denominated transactions continued to present both sponsors and investors with a challenge. The continued volatility and uncertainty in the Eurozone area led to a “flight to quality” by many investors, leaving European money market funds yielding very low returns. The collateral solution of choice was therefore medium term notes issued by the EBRD or International Bank for Reconstruction and Development (IBRD).
30
Aon Benfield Securities
Asia / Pacific Region According to the Special Evaluation Study on the Asian Development Bank’s Response to Natural Disasters and Disaster Risks, four of the five cities classified as extreme risks among the world’s fastest growing urban areas are situated in Asia. The Asia region also accounts for six of the top 15 costliest global economic losses since 1950 (Table 12), but due to a relatively low insurance penetration, insured losses in Asia during this period are much lower than those seen in more mature economies, such as the U.S. Low levels of insurance can exacerbate the impact of natural disasters, and Asia’s rapid economic progress may become inhibited due to its preponderance of extreme natural disaster events. Table 12: Top 15 Costliest Global Economic Loss Events 1950-2012 (Inflation adjusted: 2012 USD) Date
Event
Country / Region
Deaths
Economic Loss (USD)
Insured Loss (USD)
March 2011
EQ/Tsunami
Japan
15,854
217,000,000,000
36,000,000,000
January 1995
Earthquake
Japan
5,502
156,500,000,000
4,700,000,000
August 2005
HU Katrina
U.S., Bahamas
1,833
146,100,000,000
78,200,000,000
May 2008
Earthquake
China
87,587
90,100,000,000
400,000,000
Summer 1988
Drought/Heatwave
United States
7,500
79,400,000,000
1,900,000,000
January 1994
Earthquake
United States
60
69,100,000,000
24,000,000,000
October 2012
HU Sandy
U.S., Caribbean, Bahamas
254
*65,000,000,000
*28,200,000,000
Summer 1980
Drought/Heatwave
United States
10,000
59,000,000,000
700,000,000
November 1980
Earthquake
Italy
4,689
53,700,000,000
540,000,000
July/Dec. 2011
Flooding
Thailand
813
45,800,000,000
15,800,000,000
August 1992
HU Andrew
U.S., Bahamas
26
44,400,000,000
25,500,000,000
Summer 1998
Flooding
China
3,656
42,900,000,000
1,400,000,000
September 2008
HU Ike
U.S., Caribbean
153
35,200,000,000
16,400,000,000
Yearlong 2012
Drought/Heatwave
United States
123
*35,000,000,000
*20,000,000,000
October 2004
Earthquake
Japan
40
33,700,000,000
915,000,000
Source: Impact Forecasting, "Annual Global Climate and Catastrophe Report 2012 * Denotes preliminary losses which are subject to change
Despite the increased interest from Asia Pacific sponsors, there was no new issuance in the region for the 12-month period ending June 30, 2013. As discussions with potential sponsors continue, and concerns over adequate coverage persist, we expect new transactions will be brought to the ILS market in the near future.
31
Insurance-Linked Securities 2013
April 1 Renewals The April 1, 2013 renewals in Japan were finalized in line with expectations. Insurers secured sufficient capacity from the traditional reinsurance market, both for their wind and earthquake risk transfer programs. Japan cedents have become increasingly comfortable with the stability and capacity provided by the ILS market. However, they remain somewhat cautious with the use of new markets, typically preferring long-term and established business relationships. Additional challenges include issuances in local currency and lack of reinstatements. The capacity provided by the ILS market remains a small part of the total Japan market reinsurance placement. In the coming years, we expect ILS will have a place in large insurers’ overall risk transfer programs.
Model Updates In June 2013, modeling firm AIR released an updated earthquake model for Japan — Version 6.2.1, as implemented in CLASIC/2 Version 15.0.1 and CATRADER Version 15.0. The model incorporates knowledge gained from the 2011 Tohoku earthquake, including ground motion data, damage observations and detailed claims data. The damage functions for all lines of business have also been revisited. In addition, the updated model incorporates the industry’s first fully probabilistic tsunami modeling capability, capturing both the nature of a tsunami’s development and its dynamic behavior as it nears the coast and moves onshore. AIR has also included explicit modeling of liquefaction, which produced severe damage in the Tohoku event.
32
Aon Benfield Securities
A Market Discussion with ILS Investors A Panel Interview Hosted by Aon Benfield Securities Aon Benfield Securities recently discussed a number of issues on the ILS market with five active investors. The conversation, transcribed in this section, provides insight into their views and aspiration for the market as a whole. Our panel included: • Christophe Fritsch, Head of Insurance-Linked Securities, AXA Investment Managers • Nelson Seo, Co-Founder and Managing Principal, Fermat Capital Management, LLC • Sandro Kriesch, Partner, Twelve Capital • R ob Procter, Co-Founder and Managing Director, and Jonathan Barnes, Head of Origination Non-Life, Securis Investment Partners • Jonathan Malawer, Managing Director, K2 Advisors The transcript was edited for clarity and brevity.
33
Insurance-Linked Securities 2013
Christophe Fritsch, Head of Insurance-Linked Securities, AXA Investment Managers 1. What brought you to the ILS Market? The AXA Group created AXA Investment Managers (AXA IM) in 1994 as a specialist asset manager focused on delivering value to our clients in areas where we believe we have a competitive advantage. In this vein, AXA IM began AXA Structured Finance business in 1995 and, with the desire for uncorrelated investment options, we established a fully dedicated ILS team in 2007. An uncorrelated strategy, such as ILS, appealed to investors. Being part of AXA, one of the largest insurance groups, gives us access to information and thus represents a strong competitive advantage combined with our structured finance expertise.
2. How do you think about the market internally? We consider the ILS market an exciting growth opportunity given the disintermediation of the insurance sector. We study the types of risks, and as long as it does not include some level of credit or equity risk we can study the opportunity. We require modeling and pricing intelligence on the underlying risk; we have expertise and access to almost all types of models and intelligence on the risk. The type of vehicle is not an issue for us, as we can invest in all types of markets: cat bonds, collateralized reinsurance (by transforming the reinsurance contract into a financial asset), ILWs, etc. Key to our decision making process is our capacity to access risk and price accordingly. This is often linked to a question of the data quality available and level of transparency by the cedent. Last but not least, for a given fund we want to match the assets and liabilities so the proportion of assets we manage (such as cat bonds which are more liquid) versus private transactions (such as collateralized insurance which are not liquid but short dated) differ depending on the level of liquidity we provide on the liability of that fund.
3. What do you hope to achieve for your clients? We manage funds and mandates for our clients who are mainly pension funds, life insurance companies, alternative funds of funds and family offices. Certain clients have different objectives in term of the risk / return they want to achieve and on the liquidity they need. We take into account their constraints and thus tailor funds or mandates to achieve the right level of performance sought by the client. Our aim is to provide clients with access to an asset class which diversifies their portfolio, while managing the downside thanks to the selection. Our clients invest in our funds and benefit from the fact we are an asset manager with both skills in capital markets and insurance markets.
34
Aon Benfield Securities
4. Much has been discussed on the influx of capital into the ILS market in 2013. How has this affected your business? This phenomenon led to a spread tightening, especially on cat bonds. We invested more intensively in other segments of the ILS market: namely, collateralized reinsurance, ILWs, and direct private transactions. The selection has to be more stringent during those periods too.
5. Should traditional fixed income rates increase further, would your investors continue to have interest in the market? Most of our investors are long term investors and invest in the ILS asset class within their strategic asset allocation for diversification reasons. So when they embrace ILS, it becomes part of their allocation for a long time even if another part of their investment in ILS can be tactical. Therefore the percentage invested in ILS can vary around the strategic allocation by increasing or decreasing depending on fixed income rates, but it represents a small part of the total investment portfolio.
6. In what ways will convergence of the traditional and capital markets direct the ILS market? It depends on how you define the ILS market, but we have seen some interesting developments over the past months. ILS asset managers are doing more reinsurance deals and reinsurers are launching asset management platforms. Cat bonds still represent a small part of the ILS world. However, there is room for significant growth if more traditional reinsurance risks are transferred to the capital markets. I think that to develop the capital market segment the market would need more liquid ILS assets, such as cat bonds; if their size increases then the liquidity will increase, and therefore the number and size of potential institutional investors interested would also increase. As of today collateralized reinsurance and private transactions represent the most important part of the market. However, as they are illiquid, investors can only invest into them through less liquid funds formats, such as hedge funds, but for which traditional Institutional investors have a small allocation to.
35
Insurance-Linked Securities 2013
Nelson Seo, Co-Founder and Managing Principal, Fermat Capital Management, LLC 1. What brought you to the ILS Market? A few of the principals here, my brother John included, became involved in ILS via Lehman Brothers back in 1998 where they were instrumental in the development of the ILS market. Then in 2001, John and I started Fermat Capital with the idea of bringing this new asset class to institutional investors. All of us were attracted to being able to develop a new form of risk transfer, one with both good risk-reward and a societal benefit, for the capital markets.
2. How do you think about the market internally? Internally, I suppose we view ourselves as stewards of the market. We’re very proud to have been a key contributor in the development of the ILS market and are keen to see it continue to grow in innovation and robustness.
3. What do you hope to achieve for your clients/programs? Fermat Capital has always looked to provide the best risk-reward for our clients, and we seek to provide this in the most sophisticated manner possible. We also strive to deliver portfolios of risks that we believe in and not just ones that we believe clients might desire.
4. Much has been discussed on the influx of capital into the ILS market in 2013. How has this affected your business? The recent influx of capital has spurred a great deal of growth in our market, bringing in new cedents and risks, which is certainly beneficial to investors. This additional capacity is also helping the market to mature even further and solidifying a permanent place for ILS in (re)insurer hedging programs.
5. Should traditional fixed income rates increase further, would your investors continue to have interest in the market? Most definitely. From everything we’ve seen, investors who are particularly sensitive to broader interest rates do not make up a large portion of the investor capacity. The vast majority of investors in this market are attracted to the uncorrelated risk premium that the ILS market generates.
6. In what ways will convergence of the traditional and capital markets direct the ILS market? The main effect of this convergence is that it should help the ILS market to grow significantly in a number of ways. We expect some important trends to continue to accelerate: • Continued increase in share of indemnity based trigger structures • Inclusion of measured amounts of complex and non-modeled risks • More flexible transaction structures which can react to changes to cedent’s book of business and capital structure. All of these factors increase the value of issuing ILS for cedents by improving capital efficiency, paving the way for increased market growth.
36
Aon Benfield Securities
Sandro Kriesch, Partner, Twelve Capital 1. What brought you to the ILS Market? Twelve Capital is a spin-off / management buyout from Horizon21, where the founding partners worked together. The firm combines a select set of individuals with (re)insurance expertise supporting the strategy of generating “return on insurance” for our investors. Twelve Capital does not only invest in ILS but also insurance debt. Our investors can profit from the unique combination of these different finance streams as our analysts combine credit and underwriting knowhow.
2. How do you think about the market internally? The ILS market is a convergence market which has gone through a number of cleansing events. As is the case in other industries these events foster the development of sounder, more risk-adjusted investment opportunities. While reinsurance has been around for a long time, cat bonds are yet a rather young security which generated some novelty premium in earlier days. Twelve Capital uses all available ILS instruments for its funds and mandate offerings, depending on client’s appetite. The convergence market will develop further because of the large groups of suppliers on one hand and demand on the other hand will bring about further innovation and new bonds/methods/trigger mechanisms will emanate.
3. What do you hope to achieve for your clients/programs? Twelve Capital has in-depth knowledge of the market. Our approach is one of fundamental analysis and alpha generation, not a pure beta play. We learned so far that this approach suits both investors and cedents at the same time as professionals speak to each other. Studying the market, keeping detailed information, evaluating options should bring our investors the best investment for the dollar. We concentrate both on asset allocation (per line of business) and stock picking (choosing the best within each line of business).
4. Much has been discussed on the influx of capital into the ILS market in 2013. How has this affected your business? We see stronger interest from institutional clients and increased attraction also for collateralized reinsurance. The hay days of blind cat bond buying may soon be part of the past. With more professional players entering the market traditional reinsurers are becoming more and more protective of “their” turf. A series of new ventures in this regards are proof of that. We face deeper due diligences with institutional investors who use often third parties (also brokers) to help them understand. We are positive that this will bring about some Darwinism in the ILS sector.
37
Insurance-Linked Securities 2013
5. Should traditional fixed income rates increase further, would your investors continue to have interest in the market? Most are not sensitive to this matter as the view is that the current level of cat bond spreads are still fine. If those will decrease further we trust that some clients will start to have second thoughts. Others are clearly sensitive to interest rate shifts, with treasury money market funds as the major underlying collateral some of the interest spike should be mitigated, though. We believe that the ILS market will continue to be attractive because of its fundamental low correlation to financial markets in general. This fact will not go away even after a large catastrophe which will happen at some stage. At that time, we trust, investors will double up rather than redeem.
6. In what ways will convergence of the traditional and capital markets direct the ILS market? Traditional reinsurers will likely lose some of their existing business. We anticipate a growing cat bond market and an extension of the collateralized reinsurance market. The current approximate USD40 billion of the total convergence market may well go to USD80 billion by 2016. New transaction structures with more efficient transformers and lower transaction costs are almost certain by that time. Competition leads to efficiency which can only be good for investors and protection buyers at the same time.
38
Aon Benfield Securities
Rob Procter, Co-Founder and Managing Director, and Jonathan Barnes, Head of Origination Non-Life, Securis Investment Partners 1. What brought you to the ILS Market? We established Securis Investment Partners back in 2005, as a specialist ILS fund manager, in response to what we saw at the time as a growing need for alternative capital to support many forms of insurance risk. We could see that many cedents were increasingly encouraged, perhaps by regulatory or rating agency requirements, to look to cede risks into the capital markets, while investors were increasingly looking for diversifying sources of return, a box that ILS clearly ticks. At the same time, there was relatively little by way of competitor businesses specializing in the ILS space.
2. How do you think about the market internally? The ILS market is fascinating. It is one that is continually evolving and growing quite quickly. In the particular instance of property catastrophe reinsurance risk, alternative capital will likely continue to make inroads into the share of the market held by traditional incumbents. This is partly as a result of the collateralized solution that the ILS market ordinarily provides to the protection buyer, in contrast to the traditional solution whereby the buyer usually bears perhaps undesirable counterpart credit risk. The market is also characterized by complexity, and one where we must always be wary of investments we are entering into. Pricing is important of course, but so are terms and conditions, especially in a softening market. We need to be very well-equipped to understand the risks that we run and to ensure that all risks we take on are properly modeled and priced for.
3. What do you hope to achieve for your clients/programs? In our more complex and higher-yielding private non-life transactions we work closely with clients and intermediaries, providing feed-back and suggestions concerning the structure of prospective transactions. In short, we seek to ‘add value’ by tailoring protections that meet our clients’ specific objectives and constraints. Whilst at times, this can be a time-consuming and iterative process, we believe our clients differentiate between price and value and that we are better rewarded when we provide this service than we are when investing in more commoditized risk transfer products. We also seek to develop long-term relationships based on continuity in which both parties benefit from taking a longer-term view of the pricing cycle.
4. Much has been discussed on the influx of capital into the ILS market in 2013. How has this affected your business? Although the recent influx of capital into the ILS market has resulted in tighter spreads, this in-turn appears to be stimulating the sponsorship of additional issues. The preparedness of ILS investors to accept lower absolute returns, should also make cat bonds a more appealing option to sponsors seeking protection for diversifying perils. As the ILS sector attracts business away from the reinsurance market, we would expect to see further reductions in the demand for retrocession protection. At the same time, we have seen new entrants specifically target retrocession risk, in pursuit of higher absolute returns. In summary, we see the retrocession sector becoming increasingly challenging relative to the larger reinsurance market.
39
Insurance-Linked Securities 2013
5. Should traditional fixed income rates increase further, would your investors continue to have interest in the market? Yes, while higher fixed income rates may allow traditional reinsurers to deliver, all things equal, higher returns on capital due to their asset gearing; higher interest rates will also allow ILS funds to deliver higher returns. This is due to collateral being necessarily invested in a near risk-free structure of minimal duration, or cash. In either case, a rise in the risk-free rate will translate into higher returns, thus ILS funds are not at a competitive disadvantage. And the advantage of an ILS product offering goes well beyond the influence of interest rates, offering certain collateral as well as other innovative solutions to the benefit of the protection buyer.
6. In what ways will convergence of the traditional and capital markets direct the ILS market? The ILS market is just another form of capital support for (re)insurance risk. In the longer term, its ability to survive and prosper will depend on its merits as a solution provider for risk transfer, in comparison to the solution and products offered by the traditional markets. Many traditional players are setting up their own vehicles to try and harness the potential of the ILS market. But many if not most of these will fail in our view, given the difficulty in persuading external investors that they are not being selected against in comparison to the risks the reinsurer chooses to place on its own proprietary balance sheet. There is an inherent and obvious conflict. In contrast, independent and well-capitalized ILS market players should continue to grow and thrive, provided they have invested sufficiently in infrastructure — in particular, people and systems — such that their offerings are innovative, well-structured and appealing to buyers.
40
Aon Benfield Securities
Jonathan Malawer, Managing Director, K2 Advisors 1. What brought you to the ILS Market? K2 was an early adopter of ILS through our initial allocation in 2003, driven by its diversification benefits. At that time there were only a handful of ILS managers representing this new asset class. We recognized the benefit of ILS through multiple lenses. First, the unique risk factors that are associated with the strategy allow the ability to diversify our risk profile from traditional hedge fund strategies. We also recognized that the inefficiencies in transferring insurance risk present opportunities for those that have the appropriate portfolio manager skill set. This was especially true in the early days of the market and we feel it remains in effect today.
2. How do you think about the market internally? We believe an allocation to ILS benefits our institutional client portfolios primarily through its relatively low correlation to traditional market factors. In addition, we are attracted to the market’s floating rate, short-term maturity features and its current relative attractiveness from a yield perspective when compared to other fixed income markets. Our approach is to maintain an ongoing dialogue with various market participants to form our independent opinion on the relative attractiveness of the ILS market at a given point in time. When pricing conditions are less attractive, we take a more conservative approach to how we allocate capital to ILS managers. The opposite may be true when there is material re-pricing in the market; in particular after a major event. In addition, there have been pricing dislocations across ILS instruments that have presented benefits to utilizing a tactical approach.
3. What do you hope to achieve for your clients/programs? Our main objective in utilizing the ILS strategy is to improve the risk and return characteristics of the overall portfolio for institutional investors. K2’s client base is global and primarily consists of corporate and government pension plans. As we provide the ability to tailor solutions for clients, the risk/return profile of each individual investor will influence our objectives for an ILS allocation. As a result, we access the market through a variety of ILS managers with low, moderate and high risk and return profiles and seek specialized managers that complement each other across the various ILS strategies. We believe this approach helps K2 to meet our clients’ needs.
4. Much has been discussed on the influx of capital into the ILS market in 2013. How has this affected your business? We recognize that the market is always changing. We saw this in 2008 when multistrategy hedge funds were liquidating their ILS investments to meet redemptions, and now with pension investors that recognize the benefits of the asset class. Capital flows are a component of the market we study carefully given their influence on reinsurance pricing and risk taking. Given the recent material flows into the market and its impact on pricing, we have become more conservative in our ILS allocations. Our underlying managers have a distinct market focus and investment style. This allows K2 the ability to provide capital based on the relative value attractiveness across market segments which may be impacted by flows.
41
Insurance-Linked Securities 2013
5. Should traditional fixed income rates increase further, would your investors continue to have interest in the market? With ILS instruments primarily consisting of floating rate and short-term maturity features, we are attracted to the ILS market’s historically low sensitivity to interest rate risk and its short-term frequency in repricing risk. As a long-term ILS allocator, K2 has been invested in the strategy during higher interest rate environments. Looking back, we see the benefits of being invested from a diversification perspective and do not anticipate a material shift in pension investor sentiment should traditional fixed income rates increase further as the ILS floating rate feature will benefit from a rising interest rate environment.
6. In what ways will convergence of the traditional and capital markets direct the ILS market? From an allocator’s perspective, we see multiple benefits in the convergence of the market as it makes it more competitive to find the right solutions for our underlying pension clients allowing for greater market innovation. This trend also provides access to additional resources, business lines and should foster continued growth of the ILS market size. We recognize convergence also carries additional considerations including the potential conflicts and the appropriate alignment of interests when a traditional reinsurer manages third-party capital. In some cases, those issues may be difficult to address making the ILS manager with no affiliation to a traditional reinsurance company a more attractive solution. There are natural barriers to how far convergence will extend from various vantage points when considering the different participants and their roles in the market.
42
Aon Benfield Securities
43
Insurance-Linked Securities 2013
Appendix I Catastrophe Bond Issuance Statistics As of June 30, 2013 Source: Aon Benfield Securities
44
Aon Benfield Securities
Figure 1: Catastrophe Bond Issuance by Year (Years ending June 30) 9,000
Property Issuance Life / Health Issuance
8,145
8,000
USD Millions
7,000
6,430
6,665
5,914
6,000 5,000
4,661
4,000
4,382
3,279
3,000 1,958
2,000 1,000 0
1,780
1,499 1,011
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Aon Benfield Securities
Figure 2: Outstanding and Cumulative Catastrophe Bond Volume, 2003 – 2013 (Years ending June 30)
45,000
Life / Health Outstanding
Total Cumulative Bonds
44,035
40,000
USD Millions
Cumulative Property Issuance
50,700
50,000
Property Outstanding
37,605
35,000
33,223
30,000
28,562 26,782
25,000 20,867
20,000
10,000 5,000 0
17,513
16,155
15,000
12,911
12,723 7,945
9,444
3,005
3,876
2003
2004
4,741
2005
13,249
13,167
2009
2010
14,923 11,504
6,608
2006
2007
2008
2011
2012
2013
Source: Aon Benfield Securities
45
Insurance-Linked Securities 2013
Figure 3: Catastrophe Bonds Maturing by Year (Years ending June 30) 6,000
Property Maturities Life / Health Maturities
5,674
USD Millions
5,000
5,585
4,531
4,157 3,939
4,000
3,900
3,000 2,670
2,483
2,000
804
1,000
371
0
2008
2009
425
329
155
100
2010
2011
2012
2013
2014
250
2015
Source: Aon Benfield Securities
Figure 4: Catastrophe Bond Issuance by Half-Year 9,000
January - June July - December
8,000
USD Millions
7,000
3,404
6,000 5,000
2,692 2,625
4,000
2,842
3,000 4,976
320
2,011
2,000 1,000 0
Source: Aon Benfield Securities
46
2008
3,973
2012
2013
1,757
1,460
2007
3,588 2,650
2,510
2009
2010
2011
Aon Benfield Securities
Figure 5: Investor by Category (Years ending June 30) 2%
2% Catastrophe Fund
12%
Institutional
5%
5%
5%
Mutual Fund Hedge Fund
51%
43%
Reinsurer
41%
34%
2012
2013 Source: Aon Benfield Securities
Figure 6: Investor by Country/Region (Years ending June 30) U.S.
9%
11% 5%
8%
Bermuda Switzerland
44%
UK
25%
Other
14%
46% 19%
19%
2013
2012
Source: Aon Benfield Securities
Figure 7: Aon Benfield All Bond Indices versus Financial Benchmarks 140% 120%
CMBS Fixed Rate 3-5 Yrs
100%
ABS 3-5 Yrs, Fixed Rate
80%
S&P 500
Total Return
All Bond 3 Year U.S. Corporate BB+
60% 40% 20% 0% -20% -40%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Aon Benfield Securities, Bloomberg
47
Insurance-Linked Securities 2013
Figure 8: Historical Performance of Aon Benfield ILS Indices All Bond
140%
U.S. Hurricane BB-rated
120%
U.S. EQ
Total Return
100% 80% 60% 40% 20% 0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Aon Benfield Securities
Figure 9: Aon Benfield ILS Price Return Index ILS Price Return Index
105
Total Return
101
97
93
89
85
Source: Aon Benfield Securities
48
2000 2001 2002 2003 2004 2006 2005 2007 2008 2009 2010 2011 2012
Aon Benfield Securities
Figure 9: Form of Transaction ILW
100%
Sidecar Collateralized Re Cat Bonds
95%
Traditional UNL
90%
85%
80%
75%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD
Source: Aon Benfield Securities
Figure 10: Total U.S. ILW Trade Volume and Price Movement since 2011 1,400
$30bn ANP
120
1,200
100
1,000
$50bn ANP $80bn ANP Original Q3/4 Forecast
Price Movement by Quarter
140
80
800
60
600
40
400
20
200
1
Q
4
Q
3
Q
2
Q
1
Q
4
Q
3
Q
2
Q
1
Q
4 st /Q ca 3 re Q Fo 013 2 2 Q
0
13
20
13
20
12
20
12
20
12
20
12
20
11
20
11
20
11
20
11
20
0
Total U.S. Trade Volume (USD Millions)
Total U.S. Trade Volume
Source: Aon Benfield Securities
49
Insurance-Linked Securities 2013
Appendix II Property Catastrophe Bonds – Transaction Summary As of June 30, 2013 Source: Aon Benfield Securities
50
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Fitch
Dec-96
St Paul Re U.K.
George Town Re, Ltd.
Worldwide All Perils incl. Marine & Aviation
Indemnity
TRS
$44,500
Dec-96
St Paul Re U.K.*
George Town Re, Ltd.
Worldwide All Perils incl. Marine & Aviation
Indemnity
TRS
$24,000
Aaa
AAA
Jun-97
United Services Automobile Association
Residential Reinsurance Limited
Class A-1
US HU
Indemnity
TRS
$163,800
Aaa
AAA
Jun-97
United Services Automobile Association
Residential Reinsurance Limited
Class A-2
US HU
Indemnity
TRS
$313,180
Ba2
BB
Oct-97
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.*
SR Earthquake Fund, Ltd.
Class A-2
US EQ
Industry Index
TRS
$20,000
Baa3
BBB-
Oct-97
Swiss Reinsurance Company Ltd.
SR Earthquake Fund, Ltd.
Class B
US EQ
Industry Index
TRS
$60,300
Ba1
BB
Oct-97
Swiss Reinsurance Company Ltd.
SR Earthquake Fund, Ltd.
Class C
US EQ
Industry Index
TRS
$14,700
Ba3
B
Nov-97
Tokio Marine & Nichido Fire Insurance Co., Ltd.
Parametric Re, Ltd.
JP EQ
Parametric
TRS
$80,000
Ba2
Nov-97
Tokio Marine & Nichido Fire Insurance Co., Ltd.
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
Centre Solutions (Bermuda) Limited (Zurich Group)
Trinity Re, Ltd.
Class A-2
US HU
Indemnity
TRS
$61,533
Ba3
BB
Jun-98
United Services Automobile Association
Residential Reinsurance Limited
US HU
Indemnity
TRS
$450,000
Ba2
Jun-98
The Yasuda Fire and Marine Insurance Company Pacific Re, Ltd. Limited
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
United States Fidelity and Guaranty Company
Mosaic Re, Ltd.
Class B
US HU, EQ, ST
Indemnity
TRS
$21,000
Jul-98
United States Fidelity and Guaranty Company
Mosaic Re, Ltd.
US HU, EQ, ST
Indemnity
TRS
$9,000
Dec-98
Centre Solutions (Bermuda) Limited (Zurich Group)
Trinity Re 1999, Ltd.
Class A-1
US HU
Indemnity
TRS
$2,385
Aaa
AAA
Dec-98
Centre Solutions (Bermuda) Limited (Zurich Group)
Trinity Re 1999, Ltd.
Class A-2
US HU
Indemnity
TRS
$51,615
Ba3
BB
Feb-99
United States Fidelity and Guaranty Company
Mosaic Re II, Ltd.
Class A
US HU, EQ, ST
Indemnity
TRS
$25,000
Feb-99
United States Fidelity and Guaranty Company
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
Series 1999
Ba2
BB
BB
BB
BB+
* Equity
51
Insurance-Linked Securities 2013
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Fitch
May-99
Oriental Land Co., Ltd.
Concentric, Ltd.
JP EQ
Parametric
TRS
$100,000
Ba1
BB+
Jun-99
United Services Automobile Association
Residential Reinsurance Limited
US HU
Indemnity
TRS
$200,000
Ba2
BB
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
Gold Eagle Capital Limited
Class B
US HU, EQ
Modeled Loss
TRS
$126,600
Ba2
BB
Nov-99
American Re*
Gold Eagle Capital Limited
US HU, EQ
Modeled Loss
TRS
$5,500
Ba1
BB+
Nov-99
American Re*
Gold Eagle Capital Limited
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
Industry Index
TRS
$145,500
Mar-00
Lehman Re Ltd.*
Seismic Limited
Industry Index
TRS
$4,500
Mar-00
SCOR
Atlas Reinsurance p.l.c.
Class A
EU Wind, CA/ JP EQ
Indemnity
TRS
$70,000
BBB+
BBB+
Mar-00
SCOR
Atlas Reinsurance p.l.c.
Class B
EU Wind, CA/ JP EQ
Indemnity
TRS
$30,000
BBB-
BBB-
Mar-00
SCOR
Atlas Reinsurance p.l.c.
Class C
EU Wind, CA/ JP EQ
Indemnity
TRS
$100,000
B-
B-
Apr-00
Sorema S..A
Halyard Re B.V.
EU/JP Wind, JP EQ
Indemnity
TRS
$17,000
May-00
State Farm Companies
Alpha Wind 2000-A Ltd.
US HU
Indemnity
TRS
$52,500
BB+
May-00
State Farm Companies*
Alpha Wind 2000-A Ltd.
US HU
Indemnity
TRS
$37,500
BB
Jun-00
United Services Automobile Association
Residential Reinsurance 2000 Limited
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.
Ba3
BB+
BB
Dec-00
Munich Re*
PRIME Capital Hurricane Ltd.
* Equity
52
Series 2000
Class B
Class B
US HU
Parametric Index
TRS
$159,000
US HU
Parametric Index
TRS
$6,000
BB
Ba2
BB+
BB+
BB+
BB
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Ba2
BB+
Ba2
BB+
Fitch
Feb-01
Swiss Reinsurance Company Ltd.
Western Capital Limited
US EQ
Industry Index
TRS
$97,000
Feb-01
Swiss Reinsurance Company Ltd.*
Western Capital Limited
US EQ
Industry Index
TRS
$3,000
Mar-01
American Re
Gold Eagle Capital 2001 Limited
US HU, EQ
Modeled Loss
TRS
$116,400
Apr-01
Sorema SA
Halyard Re B.V.
EU Wind, JP EQ, TY
Indemnity
TRS
$17,000
May-01
Swiss Reinsurance Company Ltd.*
SR Wind Ltd.
Class B-1
US HU, EU Wind
Parametric Index
TRS
$1,800
BB
BB
May-01
Swiss Reinsurance Company Ltd.*
SR Wind Ltd.
Class B-2
US HU, EU Wind
Parametric Index
TRS
$1,800
BB
BB
May-01
Swiss Reinsurance Company Ltd.
SR Wind Ltd.
Class A-1
US HU, EU Wind
Parametric Index
TRS
$58,200
BB+
BB+
May-01
Swiss Reinsurance Company Ltd.
SR Wind Ltd.
Class A-2
US HU, EU Wind
Parametric Index
TRS
$58,200
BB+
BB+
Jun-01
United Services Automobile Association
Residential Reinsurance 2001 Limited
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
United Services Automobile Association
Residential Reinsurance 2002 Limited
US HU
Indemnity
TRS
$125,000
Ba3
BB+
Jun-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-1
Class A
US HU
Parametric Index
TRS
$85,000
Ba3
BB+
Jun-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-1
Class B
EU Wind
Parametric Index
TRS
$50,000
Ba3
BB+
Jun-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-1
Class C
US EQ
Parametric Index
TRS
$30,000
Ba3
BB+
* Equity
53
Insurance-Linked Securities 2013
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Jun-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-1
Class D
US EQ
Parametric Index
TRS
$40,000
Baa3
BBB-
Jun-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-1
Class E
JP EQ
Parametric Index
TRS
$25,000
Ba3
BB+
Jun-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-1
Class F
US/EU Wind, US/JP EQ
Parametric Index
TRS
$25,000
Ba3
BB+
Sep-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-2
Class B
EU Wind
Parametric Index
TRS
$5,000
Ba3
BB+
Sep-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-2
Class C
US EQ
Parametric Index
TRS
$20,500
Ba3
BB+
Sep-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-2
Class D
US EQ
Parametric Index
TRS
$1,750
Baa3
BBB-
Dec-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-3
Class A
US HU
Parametric Index
TRS
$8,500
Ba3
BB+
Dec-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-3
Class B
EU Wind
Parametric Index
TRS
$21,000
Ba3
BB+
Dec-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-3
Class C
US EQ
Parametric Index
TRS
$15,700
Ba3
BB+
Dec-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-3
Class D
US EQ
Parametric Index
TRS
$25,500
Baa3
BBB-
Dec-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-3
Class E
JP EQ
Parametric Index
TRS
$30,550
Ba3
BB+
Dec-02
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2002-3
Class F
US/EU Wind, US/JP EQ
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
Swiss Reinsurance Company Ltd.
Mar-03
PIONEER 2002 Ltd.
Series 2003-1
Class A
US HU
Parametric Index
TRS
$6,500
Ba3
BB+
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2003-1
Class B
EU Wind
Parametric Index
TRS
$8,000
Ba3
BB+
Mar-03
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2003-1
Class C
US EQ
Parametric Index
TRS
$6,500
Ba3
BB+
Mar-03
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2003-1
Class D
US EQ
Parametric Index
TRS
$5,500
Baa3
BBB-
Mar-03
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2003-1
Class E
JP EQ
Parametric Index
TRS
$8,000
Ba3
BB+
Mar-03
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2003-1
Class F
US/EU Wind, US/JP EQ
Parametric Index
TRS
$8,140
Ba3
BB+
May-03
United Services Automobile Association
Residential Reinsurance 2003 Limited
US HU, EQ
Indemnity
TRS
$160,000
Ba2
BB+
Jun-03
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2003-2
Class A
US HU
Parametric Index
TRS
$9,750
Ba3
BB+
Jun-03
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2003-2
Class B
EU Wind
Parametric Index
TRS
$12,250
Ba3
BB+
Jun-03
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
Series 2003-2
Class C
US EQ
Parametric Index
TRS
$7,250
Ba3
BB+
Jun-03
Swiss Reinsurance Company Ltd.
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+
* Equity
54
Fitch
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Jun-03
Zenkyoren
Phoenix Quake Wind II Ltd.
JP TY, EQ
Parametric Index
TRS
$85,000
Ba1
BBB-
Jun-03
Zenkyoren
Phoenix Quake Wind Ltd.
JP TY, EQ
Parametric Index
TRS
$192,500
Baa3
BBB+
Jul-03
Swiss Reinsurance Company Ltd.
Arbor I Ltd.
Series 1
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$95,000
Jul-03
Swiss Reinsurance Company Ltd.
Arbor II Ltd.
Series 1
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$26,500
A1
A+
Jul-03
Swiss Reinsurance Company Ltd.
Palm Capital Ltd.
Series 1
US HU
Parametric Index
TRS
$22,350
Ba3
BB+
Jul-03
Swiss Reinsurance Company Ltd.
Oak Capital Ltd.
Series 1
EU Wind
Parametric Index
TRS
$23,600
Ba3
BB+
Jul-03
Swiss Reinsurance Company Ltd.
Sequoia Capital Ltd.
Series 1
US EQ
Parametric Index
TRS
$22,500
Ba3
BB+
Jul-03
Swiss Reinsurance Company Ltd.
Sakura Capital Ltd.
Series 1
JP EQ
Parametric Index
TRS
$14,700
Ba3
BB+
Aug-03
Central Reinsurance Corporation (for TREIP)
Formosa Re Ltd.
Taiwan EQ
Indemnity
TRS
$100,000
NR
Sep-03
Swiss Reinsurance Company Ltd.
Arbor I Ltd.
Series 2
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$60,000
B
Dec-03
Swiss Reinsurance Company Ltd.
Palm Capital Ltd.
Series 2
US HU
Parametric Index
TRS
$19,000
Dec-03
Swiss Reinsurance Company Ltd.
Arbor I Ltd.
Series 3
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$8,850
Dec-03
Swiss Reinsurance Company Ltd.
PIONEER 2002 Ltd.
US EQ
Parametric Index
TRS
$51,000
Dec-03
Electricite de France
Pylon Ltd.
Class A
EU Wind
Parametric Index
TRS
Dec-03
Electricite de France
Pylon Ltd.
Class B
EU Wind
Parametric Index
TRS
Dec-03
Swiss Reinsurance Company Ltd.
Redwood Capital III, Ltd.
US EQ
Industry Index
TRS
Dec-03
Swiss Reinsurance Company Ltd.
Redwood Capital IV, Ltd.
US EQ
Industry Index
Mar-04
Swiss Reinsurance Company Ltd.
Oak Capital Ltd.
Series 2
EU Wind
Mar-04
Swiss Reinsurance Company Ltd.
Sequoia Capital Ltd.
Series 2
Mar-04
Swiss Reinsurance Company Ltd.
Arbor Ltd.
Series 4
May-04
United Services Automobile Association
Residential Reinsurance 2004 Limited
May-04
United Services Automobile Association
Residential Reinsurance 2004 Limited
Jun-04
Converium Ltd.
Helix 04 Limited
Jun-04
Swiss Reinsurance Company Ltd.
Arbor Ltd.
Jun-04
Swiss Reinsurance Company Ltd.
Gi Capital Ltd.
Sep-04
Swiss Reinsurance Company Ltd.
Oak Capital Ltd.
Series 5
Series 3
Fitch
B
Ba3
BB+ B
Baa3
BBB-
€ 70,000
A2
BBB+
€ 120,000
Ba1
BB+
$150,000
Ba1
BB+
TRS
$200,000
Baa3
BBB-
Parametric Index
TRS
$24,000
Ba3
BB+
US EQ
Parametric Index
TRS
$11,500
Ba3
BB+
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$21,000
B
Class A
US HU, EQ
Indemnity
TRS
$127,500
BB
Class B
US HU, EQ
Indemnity
TRS
$100,000
B
US/EU Wind, US/JP EQ
Modeled Loss
Bank Deposit
$100,000
BB+
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$18,000
B
JP EQ
Parametric Index
TRS
$125,000
BB+
EU Wind
Parametric Index
TRS
$10,500
Ba3
BB+
* Equity
55
Insurance-Linked Securities 2013
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Ba3
BB+
Fitch
Sep-04
Swiss Reinsurance Company Ltd.
Sequoia Capital Ltd.
Series 3
US EQ
Parametric Index
TRS
$11,000
Sep-04
Swiss Reinsurance Company Ltd.
Arbor Ltd.
Series 6
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$31,800
B
Nov-04
Hartford Fire Insurance Company
Foundation Re Ltd.
Series 2004-I
Class A
US HU
Industry Index
TRS
$180,000
BB+
Nov-04
Hartford Fire Insurance Company
Foundation Re Ltd.
Series 2004-I
Class B
US HU, EQ
Industry Index
TRS
$67,500
BBB+
Dec-04
Swiss Reinsurance Company Ltd.
Arbor I Ltd.
Series 7
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$15,000
B
Dec-04
Swiss Reinsurance Company Ltd.
Redwood Capital V, Ltd.
US EQ
Industry Index
TRS
$150,000
Ba2
BB+
Dec-04
Swiss Reinsurance Company Ltd.
Redwood Capital VI, Ltd.
US EQ
Industry Index
TRS
$150,000
Ba2
BB+
Mar-05
Swiss Reinsurance Company Ltd.
Arbor I Ltd.
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$20,000
B
May-05
United Services Automobile Association
Residential Reinsurance 2005 Limited
Class A
US HU, EQ
Indemnity
TRS
$91,000
BB
May-05
United Services Automobile Association
Residential Reinsurance 2005 Limited
Class B
US HU, EQ
Indemnity
TRS
$85,000
B
Jun-05
Factory Mutual Insurance Company
Cascadia Limited
US EQ
Parametric
TRS
$300,000
BB+
Jun-05
Swiss Reinsurance Company Ltd.
Arbor I Ltd.
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$25,000
B
Jul-05
Zurich American Insurance Company
KAMP Re 2005 Ltd.
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
PXRE Reinsurance Ltd.
Atlantic & Western Re Limited
Class B
US/EU Wind, US HU
Modeled Loss
TRS
$200,000
B+
B
Nov-05
Munich Re
Aiolos Ltd.
EU Wind
Parametric Index
TRS
€ 110,000
BB+
Dec-05
Swiss Reinsurance Company Ltd.
Arbor I Ltd.
US/EU Wind, CA/JP EQ
Parametric Index
TRS
$18,000
B
Dec-05
PXRE Reinsurance Ltd.
Atlantic & Western Re II Limited
Class A
US/EU Wind, US EQ
Modeled Loss
TRS
$125,000
BB+
Dec-05
PXRE Reinsurance Ltd.
Atlantic & Western Re II Limited
Class B
US/EU Wind, US 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
Swiss Reinsurance Company Ltd.
Australis Ltd.
AU CY, EQ
Parametric Index
TRS
$100,000
BB
Feb-06
Swiss Reinsurance Company Ltd.
Redwood Capital VII, Ltd.
US EQ
Industry Index
TRS
$160,000
BB+
Feb-06
Swiss Reinsurance Company Ltd.
Redwood Capital VIII, Ltd.
US EQ
Industry Index
TRS
$65,000
BB+
Feb-06
Hartford Fire Insurance Company
Foundation Re Ltd.
US HU, EQ
Industry Index
TRS
$105,000
BB
* Equity
56
Series 8
Series 9
Series 10
Series 1
Series 2006-I
Class D
BB
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
May-06
The Fund for Natural Disasters
CAT-Mex Ltd.
Class A
Mexico EQ
Parametric
TRS
$150,000
BB+
May-06
The Fund for Natural Disasters
CAT-Mex Ltd.
Class B
Mexico EQ
Parametric
TRS
$10,000
BB+
May-06
ACE American Insurance Company
Calabash Re Ltd.
Class A-1
US HU
Industry Index
TRS
$100,000
BB
May-06
United Services Automobile Association
Residential Reinsurance 2006 Limited
Class A
US HU, EQ
Indemnity
TRS
$47,500
B
May-06
United Services Automobile Association
Residential Reinsurance 2006 Limited
Class C
US HU, EQ
Indemnity
TRS
$75,000
BB+
Jun-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 2
Class D
US HU
Industry Index
TRS
$10,250
B
Jun-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 2
Class E
US HU
Industry Index
TRS
$35,000
NR
Jun-06
Swiss Reinsurance Company Ltd.
Successor Japan Quake Ltd.
Series 2
Class C
JP EQ
Modeled Loss
TRS
$3,000
B
Jun-06
Swiss Reinsurance Company Ltd.
Successor Euro Wind Ltd.
Series 2
Class A
EU Wind
Parametric Index
TRS
$3,000
Ba3
BB
Jun-06
Swiss Reinsurance Company Ltd.
Successor Euro Wind Ltd.
Series 2
Class C
EU Wind
Parametric Index
TRS
$3,000
B3
B
Jun-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 1
Class B
US HU
Industry Index
TRS
$14,000
B1
BB-
Jun-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 1
Class C
US HU
Industry Index
TRS
$7,250
B2
B
Jun-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 1
Class D
US HU
Industry Index
TRS
$34,250
B
Jun-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 1
Class E
US HU
Industry Index
TRS
$5,000
NR
Jun-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 1
Class F
US HU
Industry Index
TRS
$54,000
B2
B
Jun-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Modeled Ltd.
Series 1
Class B
US HU
Modeled Loss
TRS
$42,250
B1
BB-
Jun-06
Swiss Reinsurance Company Ltd.
Successor Cal Quake Parametric Ltd.
Series 1
Class A
US EQ
Parametric Index
TRS
$47,500
Ba3
BB
Jun-06
Swiss Reinsurance Company Ltd.
Successor Japan Quake Ltd.
Series 1
Class A
JP EQ
Modeled Loss
TRS
$103,470
BB
Jun-06
Swiss Reinsurance Company Ltd.
Successor Japan Quake Ltd.
Series 1
Class B
JP EQ
Modeled Loss
TRS
$26,250
BB-
Jun-06
Swiss Reinsurance Company Ltd.
Successor Japan Quake Ltd.
Series 2
Class C
JP EQ
Modeled Loss
TRS
$70,750
B
Jun-06
Swiss Reinsurance Company Ltd.
Successor Euro Wind Ltd.
Series 1
Class A
EU Wind
Parametric Index
TRS
$97,130
Ba3
BB
Jun-06
Swiss Reinsurance Company Ltd.
Successor Euro Wind Ltd.
Series 1
Class B
EU Wind
Parametric Index
TRS
$18,500
B1
BB-
Jun-06
Swiss Reinsurance Company Ltd.
Successor Euro Wind Ltd.
Series 1
Class C
EU Wind
Parametric Index
TRS
$110,750
B3
B
Jun-06
Swiss Reinsurance Company Ltd.
Successor II Ltd.
Series 1
Class A
US/EU Wind, US/JP EQ
Modeled Loss, Parametric Index
TRS
$73,200
B3
B
Series 2006-I
Fitch
* Equity
57
Insurance-Linked Securities 2013
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Jun-06
Swiss Reinsurance Company Ltd.
Successor II Ltd.
Series 1
Class E
US/EU Wind, US/JP EQ
Modeled Loss, Parametric Index
TRS
$154,250
NR
Jun-06
Swiss Reinsurance Company Ltd.
Successor III Ltd.
Series 1
Class A
US/EU Wind, JP EQ
Modeled Loss, Parametric Index
TRS
$7,200
NR
Jun-06
Swiss Reinsurance Company Ltd.
Successor IV Ltd.
Series 1
Class A
US/EU Wind, US/JP EQ
Modeled Loss, Parametric Index
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
Mystic Re Ltd.
Series 2006-1
Class A
US HU
Industry Index
TRS
$200,000
BB+
Jun-06
Balboa Insurance Group
VASCO Re 2006 Ltd.
US HU
Indemnity
Bank Deposit
$50,000
BB+
Jun-06
Dominion Resources
DREWCAT Capital, Ltd.
US HU
Parametric Index
TRS
$50,000
NR
Jul-06
Hannover Re
Eurus Ltd.
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
Endurance Specialty Insurance Company
Shackleton Re Limited
Class B
US HU
Industry Index
TRS
$60,000
Ba3
BB
Aug-06
Endurance Specialty Insurance Company
Shackleton Re Limited
Class C
US HU, EQ
Industry Index
TRS
$50,000
Ba2
BB+
Aug-06
Tokio Marine & Nichido Fire Insurance Co., Ltd.
Fhu-Jin Ltd.
Series 1
Class B
JP TY
Parametric Index
TRS
$200,000
BB+
Aug-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 3
Class E
US HU
Industry Index
TRS
$50,000
NR
Aug-06
Factory Mutual Insurance Company
Cascadia II Limited
US EQ
Parametric
Bank Deposit
$300,000
BB+
Nov-06
Hartford Fire Insurance Company
Foundation Re II Ltd.
Series 2006-I
Class G
US (HU, EQ, ST)
Industry Index
TRS
$67,500
B
Nov-06
Hartford Fire Insurance Company
Foundation Re II Ltd.
Series 2006-I
Class A
US HU
Industry Index
TRS
$180,000
BB+
Nov-06
Liberty Mutual Insurance Company
Mystic Re Ltd.
Series 2006-2
Class A
US HU
Industry Index
TRS
$200,000
BB+
Nov-06
Liberty Mutual Insurance Company
Mystic Re Ltd.
Series 2006-2
Class B
US HU
Industry Index
TRS
$125,000
BB
Dec-06
Swiss Reinsurance Company Ltd.
Successor I Ltd.
Series 1
Class B
NA/EU W, CA/JP Q
Industry Index, Modeled Loss, Parametric Index
TRS
$4,000
NR
Dec-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 4
Class E
US HU
Industry Index
TRS
$4,000
NR
Dec-06
Swiss Reinsurance Company Ltd.
Successor I Ltd.
Series 2
Class B
NA/EU W, CA/JP Q
Industry Index, Modeled Loss, Parametric Index
TRS
$24,500
NR
Dec-06
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 5
Class E
US HU
Industry Index
TRS
$26,000
NR
Dec-06
Swiss Reinsurance Company Ltd.
Successor Euro Wind Ltd.
Series 3
Class A
EU Wind
Parametric Index
TRS
$118,000
Ba3
BB
Dec-06
Swiss Reinsurance Company Ltd.
Successor Euro Wind Ltd.
Series 3
Class C
EU Wind
Parametric Index
TRS
$15,000
B3
B
* Equity
58
Class A
Fitch
BB+
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Size (thousands)
Perils
Trigger
Collateral
MIS
S&P
US EQ
Indemnity
Bank Deposit
$190,000
BB+
JP EQ, EU Wind
Modeled Loss
TRS
€ 120,000
BB+
Dec-06
Zurich American Insurance Company
Lakeside Re Ltd.
Dec-06
SCOR
Atlas Reinsurance III p.l.c.
Dec-06
Swiss Reinsurance Company Ltd.
Redwood Capital IX Ltd.
Series 1
Class A
US EQ
Parametric Index
TRS
$125,000
Ba2
BB+
Dec-06
Swiss Reinsurance Company Ltd.
Redwood Capital IX Ltd.
Series 1
Class B
US EQ
Parametric Index
TRS
$125,000
Ba2
BB+
Dec-06
Swiss Reinsurance Company Ltd.
Redwood Capital IX Ltd.
Series 1
Class C
US EQ
Parametric Index
TRS
$18,000
Baa3
BBB-
Dec-06
Swiss Reinsurance Company Ltd.
Redwood Capital IX Ltd.
Series 1
Class D
US EQ
Parametric Index
TRS
$20,000
Ba3
BB
Dec-06
Swiss Reinsurance Company Ltd.
Redwood Capital IX Ltd.
Series 1
Class E
US EQ
Parametric Index
TRS
$12,000
B3
B
Jan-07
ACE American Insurance Company
Calabash Re II Ltd.
Series 2006-I
Class A-1
US HU
Modeled Loss
TRS
$100,000
BB
Jan-07
ACE American Insurance Company
Calabash Re II Ltd.
Series 2006-I
Class D-1
US EQ
Modeled Loss
TRS
$50,000
B+
Jan-07
ACE American Insurance Company
Calabash Re II Ltd.
Series 2006-I
Class E-1
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, UK Flood
Modeled Loss, Parametric Index
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+
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
Carillon Ltd.
Series 2
Class E
US HU
Industry Index
TRS
$150,000
B
May-07
The Travelers Indemnity Company
Longpoint Re Ltd.
Series 2007-1
Class A
US HU
Industry Index
TRS
$500,000
BB+
May-07
Swiss Reinsurance Company Ltd.
Successor II Ltd.
Series 2
Class A
NA/EU W, CA/JP Q
Modeled Loss, Parametric Index
TRS
$100,000
B
May-07
Mitsui Sumitomo Insurance AKIBARE Ltd. Co., Ltd.
Series 1
Class A
JP TY
Parametric Index
TRS
$90,000
BB+
May-07
Mitsui Sumitomo Insurance AKIBARE Ltd. Co., Ltd.
Series 1
Class B
JP TY
Parametric Index
TRS
$30,000
BB+
May-07
Swiss Reinsurance Company Ltd.
MedQuake Ltd.
Series 1
Class A
EU EQ
Parametric Index
TRS
$50,000
BB-
May-07
Swiss Reinsurance Company Ltd.
MedQuake Ltd.
Series 1
Class B
EU EQ
Parametric Index
TRS
$50,000
B
May-07
Liberty Mutual Insurance Company
Mystic Re II Ltd.
Series 2007-1
US HU
Industry Index
TRS
$150,000
B+
May-07
United Services Automobile Association
Residential Reinsurance 2007 Limited
Series 2007-I
Class 1
US HU, EQ
Indemnity
TRS
$145,000
BB
May-07
United Services Automobile Association
Residential Reinsurance 2007 Limited
Series 2007-I
Class 2
US HU, EQ
Indemnity
TRS
$125,000
B
Fitch
* Equity
59
Insurance-Linked Securities 2013
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Fitch
May-07
United Services Automobile Association
Residential Reinsurance 2007 Limited
Series 2007-I
Class 3
US HU, EQ
Indemnity
TRS
$75,000
B
May-07
United Services Automobile Association
Residential Reinsurance 2007 Limited
Series 2007-I
Class 4
US HU, EQ
Indemnity
TRS
$155,000
BB+
May-07
United Services Automobile Association
Residential Reinsurance 2007 Limited
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, US Q
Industry Index, Modeled Loss
TRS
$75,000
B
Jun-07
Allstate Insurance Company
Willow Re Ltd.
Series 2007-1
Class B
US HU
Industry Index
TRS
$250,000
BB+
Jun-07
Swiss Reinsurance Company Ltd.
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
Brit Insurance Limited
Fremantle Limited
Series 2007-1
Class B
US/EU/JP Wind, US/JP EQ
Industry Index
TRS
$60,000
A3
BBB+
Jun-07
Brit Insurance Limited
Fremantle Limited
Series 2007-1
Class C
US/EU/JP Wind, US/JP EQ
Industry Index
TRS
$80,000
Ba2
BB-
Jun-07
Swiss Reinsurance Company Ltd.
Spinnaker Capital Ltd.
Series 2 2007
US HU
Industry Index
TRS
$130,200
Ba2
Jun-07
Swiss Reinsurance Company Ltd.
FUSION 2007 Ltd.
Class A
JP TY, Mexico EQ
Parametric Index
TRS
$30,000
B
Jun-07
Swiss Reinsurance Company Ltd.
FUSION 2007 Ltd.
Class B
JP TY, Mexico EQ
Parametric Index
TRS
$80,000
B
Jun-07
Swiss Reinsurance Company Ltd.
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
US/Canada (Wind, EQ, ST, WS, WF)
Indemnity
TRS
$350,000
Aa2
AAA
Jul-07
State Farm Mutual Automobile Insurance Company
Merna Reinsurance Ltd.
Tranche B
US/Canada (Wind, EQ, ST, WS, WF)
Indemnity
TRS
$666,600
A2
AA+
Jul-07
State Farm Mutual Automobile Insurance Company
Merna Reinsurance Ltd.
Tranche C
US/Canada (Wind, EQ, ST, WS, WF)
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
Swiss Reinsurance Company Ltd.
Spinnaker Capital Ltd.
US HU
Industry Index
TRS
$50,000
NR
Oct-07
East Japan Railway Company
MIDORI Ltd.
JP EQ
Parametric
TRS
$260,000
BB+
Series 3 2007
Nov-07
Allianz Argos 14 GmbH
Blue Fin Ltd.
Series 1
Class A
EU Wind
Parametric Index
TRS
€ 155,000
BB+
Nov-07
Allianz Argos 14 GmbH
Blue Fin Ltd.
Series 1
Class B
EU Wind
Parametric Index
TRS
$65,000
BB+
Nov-07
SCOR Global P&C SE
Atlas Reinsurance IV Limited
EU Wind, JP EQ
Modeled Loss
TRS
€ 160,000
Dec-07
Catlin Group
Newton Re Limited
US EQ
Industry Index
Bank Deposit
* Equity
60
Series 2007-1
Class A
$87,500
B BB+
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Size (thousands)
Issuer
Series
Class
Perils
Trigger
Collateral
Series 2007-1
Class B
US HU
Industry Index
Bank Deposit
$137,500
MIS
S&P
Dec-07
Catlin Group
Newton Re Limited
Dec-07
Swiss Reinsurance Company Ltd.
GlobeCat Ltd.
Series LAQ
Class A-1
Latin America EQ
Modeled Loss
TRS
$25,000
Ba3
Dec-07
Swiss Reinsurance Company Ltd.
GlobeCat Ltd.
Series USW
Class A-1
US HU
Industry Index
TRS
$40,000
B3
Dec-07
Swiss Reinsurance Company Ltd.
GlobeCat Ltd.
Series CAQ
Class A-1
US EQ
Industry Index
TRS
$20,000
B1
Dec-07
Groupama S.A.
Green Valley Ltd.
Series 1
Class A
EU Wind
Parametric Index
TRS
€ 200,000
BB+
Dec-07
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 6
Class C
US HU
Industry Index
TRS
$30,000
B2
Dec-07
Swiss Reinsurance Company Ltd.
Successor Hurricane Industry Ltd.
Series 6
Class D
US HU
Industry Index
TRS
$30,000
Dec-07
Swiss Reinsurance Company Ltd.
Successor II Ltd.
Series 3
Class C
US/EU Wind, US/JP EQ
Parametric Index
TRS
$50,000
Dec-07
Swiss Reinsurance Company Ltd.
Successor II Ltd.
Series 3
Class E
US/EU Wind, US/JP EQ
Parametric Index
TRS
$50,000
Dec-07
Swiss Reinsurance Company Ltd.
Redwood Capital X Ltd.
Series 1
Class A
US EQ
Parametric Index
TRS
$25,000
Baa3
Dec-07
Swiss Reinsurance Company Ltd.
Redwood Capital X Ltd.
Series 1
Class B
US EQ
Parametric Index
TRS
$227,700
Ba2
Dec-07
Swiss Reinsurance Company Ltd.
Redwood Capital X Ltd.
Series 1
Class C
US EQ
Parametric Index
TRS
$50,200
Ba3
Dec-07
Swiss Reinsurance Company Ltd.
Redwood Capital X Ltd.
Series 2
Class D
US EQ
Industry Index
TRS
$130,500
Ba3
Dec-07
Swiss Reinsurance Company Ltd.
Redwood Capital X Ltd.
Series 2
Class E
US EQ
Industry Index
TRS
$45,200
B2
Dec-07
Swiss Reinsurance Company Ltd.
Redwood Capital X Ltd.
Series 2
Class F
US EQ
Industry Index
TRS
$20,000
NR
Feb-08
Catlin Group
Newton Re Limited
Series 2008-1
Class A
US/EU/JP Wind, US/JP EQ
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 US All Natural Perils
Indemnity
TRS
$75,000
BB
Mar-08
Chubb Group
East Lane Re II Ltd.
Series 2008-I
Class B
Northeast US All Natural Perils
Indemnity
TRS
$70,000
BB
Mar-08
Chubb Group
East Lane Re II Ltd.
Series 2008-I
Class C
US/Canada 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
United Services Automobile Association
Residential Reinsurance 2008 Limited
Series 2008-I
Class 1
US HU, EQ
Indemnity
TRS
$125,000
Fitch
BB+
B B
BB
* Equity
61
Insurance-Linked Securities 2013
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
May-08
United Services Automobile Association
Residential Reinsurance 2008 Limited
Series 2008-I
Class 2
US HU, EQ
Indemnity
TRS
$125,000
B
May-08
United Services Automobile Association
Residential Reinsurance 2008 Limited
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
US/EU/JP Wind, US/JP EQ
Indemnity
TRS
$64,000
Ba2
May-08
Flagstone Reinsurance Limited and Flagstone Reassurance Suisse SA
Valais Re Ltd.
Series 2008-1
Class C
US/EU/JP Wind, US/JP EQ
Indemnity
TRS
$40,000
B3
Jun-08
Glacier Reinsurance AG
Nelson Re Ltd.
Series 2008-I
Class G
US HU, EQ
Indemnity
TRS
$67,500
B3
Jun-08
Glacier Reinsurance AG
Nelson Re Ltd.
Series 2008-I
Class H
EU Wind
Indemnity
TRS
$45,000
B3
Jun-08
Glacier Reinsurance AG
Nelson Re Ltd.
Series 2008-I
Class I
EU Wind
Indemnity
TRS
$67,500
B1
Jun-08
Allstate Insurance Company
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
Swiss Reinsurance Company Ltd.
Vega Capital Ltd.
Series 2008-I
Class A
US/EU/JP Wind, US/JP EQ
Parametric Index
TRS
$21,000
A3
A-
Jun-08
Swiss Reinsurance Company Ltd.
Vega Capital Ltd.
Series 2008-I
Class B
US/EU/JP Wind, US/JP EQ
Parametric Index
TRS
$22,500
Baa2
BBB
Jun-08
Swiss Reinsurance Company Ltd.
Vega Capital Ltd.
Series 2008-I
Class C
US/EU/JP Wind, US/JP EQ
Parametric Index
TRS
$63,900
Ba3
Jun-08
Swiss Reinsurance Company Ltd.
Vega Capital Ltd.
Series 2008-I
Class D
US/EU/JP Wind, US/JP EQ
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
Allianz Risk Transfer (Bermuda) Limited
Blue Coast Ltd.
Series 2008-1
Class B
US HU
Industry Index
TRS
$30,000
B+
Jul-08
Allianz Risk Transfer (Bermuda) Limited
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
Atlas V Capital Limited
Series 2
US HU, EQ
Industry Index
TRS
$100,000
B+
Feb-09
SCOR Global P&C SE
Atlas V Capital Limited
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
Liberty Mutual Insurance Company
Mystic Re II Ltd.
Series 2009-I
US HU, EQ
Industry Index
TRS
$225,000
BB
Apr-09
Allianz Argos 14 GmbH
Blue Fin Ltd.
Series 2
Class A
US HU, EQ
Modeled Loss
MTN
$180,000
BB-
Apr-09
Swiss Reinsurance Company Ltd.
Successor II Ltd.
Series 4
Class F
US HU, EQ
Parametric Index
MMF
$60,000
May-09
Assurant, Inc.
Ibis Re Ltd.
Series 2009-1
Class A
US HU
Industry Index
TRS
$75,000
* Equity
62
Class A
BB
Fitch
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
May-09
Assurant, Inc.
Ibis Re Ltd.
Series 2009-1
Class B
US HU
Industry Index
TRS
$75,000
BB-
May-09
United Services Automobile Association
Residential Reinsurance 2009 Limited
Series 2009-I
Class 1
US HU, EQ
Indemnity
MMF
$70,000
BB-
May-09
United Services Automobile Association
Residential Reinsurance 2009 Limited
Series 2009-I
Class 2
US HU, EQ
Indemnity
MMF
$60,000
B-
May-09
United Services Automobile Association
Residential Reinsurance 2009 Limited
Series 2009-I
Class 4
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$120,000
BB-
Jun-09
Munich Re
Ianus Capital Ltd.
EU Wind, EQ
Parametric Index, Modeled Loss
MTN
€ 50,000
Jun-09
ACE American Insurance Company
Calabash Re III Ltd.
Series 2009-I
Class A
US HU, EQ
Modeled Loss
MTN
$86,000
BB-
Jun-09
ACE American Insurance Company
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
The Fund for Natural Disasters
MultiCat Mexico 2009 Limited
Series 2009-I
Class A
Mex EQ
Parametric
MMF
$140,000
B
Oct-09
The Fund for Natural Disasters
MultiCat Mexico 2009 Limited
Series 2009-I
Class B
Mex, HU Pacific
Parametric
MMF
$50,000
B
Oct-09
The Fund for Natural Disasters
MultiCat Mexico 2009 Limited
Series 2009-I
Class C
Mex, HU Pacific
Parametric
MMF
$50,000
B
Oct-09
The Fund for Natural Disasters
MultiCat Mexico 2009 Limited
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
Flagstone Reassurance Suisse SA
Montana Re Ltd.
Series 2009-1
Class B
US HU
Industry Index
TPR
$100,000
BB-
Dec-09
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2009-1
Class I-S1
US HU, EQ, EU Wind
Industry Index, Parametric Index
MMF
$50,000
Dec-09
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2009-1
Class I-U1
US HU, EQ
Industry Index, Parametric Index
MMF
$50,000
Dec-09
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2009-1
Class I-X1
US HU, EQ
Industry Index, Parametric Index
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
The Travelers Indemnity Company
Longpoint Re II Ltd.
Series 2009-1
Class A
US HU
Industry Index
MMF
$250,000
BB+
Dec-09
The Travelers Indemnity Company
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 Lakeside Re II Ltd. Company Ltd
CA EQ
Indemnity
MMF
$225,000
BB-
Dec-09
Swiss Reinsurance Company Ltd.
Redwood Capital XI Ltd.
Series 2009-1
Class A
CA EQ
Industry Index
MMF
$150,000
Jan-10
Hartford Fire Insurance Company
Foundation Re III Ltd.
Series 2010-1
Class A
US HU
Industry Index
MMF
$180,000
Fitch
B2
B-
B1 BB+
* Equity
63
Insurance-Linked Securities 2013
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Mar-10
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2010-1
Class II-CN3
US HU, EU Wind
Industry Index, Modeled Loss
MMF
$45,000
Mar-10
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2010-1
Class II-CL3
US HU, EU Wind
Industry Index, Modeled Loss
MMF
$35,000
Mar-10
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2010-1
Class II-BY3
US HU, EQ EU Wind, JP EQ
Industry Index, Modeled Loss
MMF
$40,000
Apr-10
State Farm Fire and Casualty Company
Merna Reinsurance II Ltd.
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
North Carolina JUA/IUA
Johnston Re Ltd.
Series 2010-1
Class A
US HU
Indemnity
MMF
$200,000
BB-
May-10
North Carolina JUA/IUA
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
National Union Fire Insurance Company of Pittsburgh
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
Industry Index, Parametric Index
MMF
$30,000
Ba3
May-10
Nationwide Mutual Insurance Company
Caelus Re II Limited
Series 2010-1
Class A
US HU, EQ
Indemnity
MMF
$185,000
May-10
Allianz Argos 14 GmbH
Blue Fin Ltd.
Series 3
Class A
US HU, EQ
Modeled Loss
MMF
$90,000
B-
May-10
Allianz Argos 14 GmbH
Blue Fin Ltd.
Series 3
Class B
US HU, EQ
Modeled Loss
MMF
$60,000
BB
May-10
United Services Automobile Association
Residential Reinsurance 2010 Limited
Series 2010-I
Class 1
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$162,500
BB
May-10
United Services Automobile Association
Residential Reinsurance 2010 Limited
Series 2010-I
Class 2
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$72,500
B+
May-10
United Services Automobile Association
Residential Reinsurance 2010 Limited
Series 2010-I
Class 3
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$52,500
B-
May-10
United Services Automobile Association
Residential Reinsurance 2010 Limited
Series 2010-I
Class 4
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$117,500
Jun-10
State Farm Mutual Automobile Insurance Company
Merna Reinsurance III Ltd
US/Canada (Wind, EQ, ST, WS, WF)
Indemnity
MMF
$250,000
Jul-10
Massachusetts Property Insurance Underwriting Association
Shore Re Ltd.
Series 2010-1
Class A
US HU
Indemnity
MMF
$96,000
BB
Sep-10
Groupama S.A.
Green Valley Ltd.
Series 2
Class A
EU Wind
Parametric Index
MTN
€ 100,000
BB+
Oct-10
AXA Global P&C
Calypso Capital Limited
Series 2010-1
Class A
EU Wind
Industry Index
TPR
€ 275,000
BB
Nov-10
American Family Mutual Insurance Company
Mariah Re Ltd.
Series 2010-1
US ST
Industry Index
MMF
$100,000
B
* Equity
64
B-
BB+
Fitch
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Dec-10
United Services Automobile Association
Residential Reinsurance 2010 Limited
Series 2010-II
Class 1
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$210,000
Dec-10
United Services Automobile Association
Residential Reinsurance 2010 Limited
Series 2010-II
Class 2
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$50,000
Dec-10
United Services Automobile Association
Residential Reinsurance 2010 Limited
Series 2010-II
Class 3
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$40,000
Dec-10
SCOR Global P&C SE
Atlas VI Capital Limited
Series 2010-1
Class A
EU Wind, JP EQ
Parametric Index
TPR
€ 75,000
Dec-10
Swiss Reinsurance Company Ltd.
Vega Capital Ltd.
Series 2010-I
Class C
US/EU/JP Wind, US/JP EQ
Multiple
MTN
$63,900
Dec-10
Swiss Reinsurance Company Ltd.
Vega Capital Ltd.
Series 2010-I
Class D
US/EU/JP Wind, US/JP EQ
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
National Union Fire Insurance Company of Pittsburgh
Lodestone Re Ltd.
Series 2010-2
Class A-1
US HU, EQ
Industry Index
MMF
$125,000
BB+
Dec-10
National Union Fire Insurance Company of Pittsburgh
Lodestone Re Ltd.
Series 2010-2
Class A-2
US HU, EQ
Industry Index
MMF
$325,000
BB
Dec-10
Flagstone Reassurance Suisse SA
Montana Re Ltd.
Series 2010-1
Class C
US HU, EQ
Multiple
TPR
$70,000
B
Dec-10
Flagstone Reassurance Suisse SA
Montana Re Ltd.
Series 2010-1
Class D
US HU, EQ
Multiple
TPR
$80,000
Dec-10
Flagstone Reassurance Suisse SA
Montana Re Ltd.
Series 2010-1
Class E
US HU, EQ/EU Wind, JP TY, JP EQ
Multiple
TPR
$60,000
B-
Dec-10
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2011-1
Class III-R3
US HU, EQ , AUS EQ
Modeled Loss, Parametric Index
MTN
$65,000
B-
Dec-10
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2011-1
Class III-S3
US HU, EQ , AUS EQ
Modeled Loss, Parametric Index
MTN
$50,000
B-
Dec-10
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2011-1
Class III-T3
US HU, EQ , AUS EQ
Modeled Loss, Parametric Index
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
Hartford Fire Insurance Company
Foundation Re III Ltd.
Series 2011-1
Class A
US HU
Industry Index
MMF
$135,000
BB+
Feb-11
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2011-2
Class IV-E3
US HU, EQ
Industry Index
MTN
$160,000
B
Feb-11
Swiss Reinsurance Company Ltd.
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
Queen Street II Capital Limited
US HU, EU Wind
Industry Index
MMF
$100,000
BB-
Apr-11
Allianz Argos 14 GmbH
Blue Fin Ltd.
Series 4
Class B
US HU, EQ
Modeled Loss
MMF
$40,000
May-11
North Carolina JUA/IUA
Johnston Re Ltd.
Series 2011-1
Class A
US HU
Indemnity
MMF
$70,000
Fitch
BB
BBa3
BB-
* Equity
65
Insurance-Linked Securities 2013
2012 Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
May-11
North Carolina JUA/IUA
Johnston Re Ltd.
Series 2011-1
Class B
US HU
Indemnity
MMF
$131,835
BB-
May-11
United Services Automobile Association
Residential Reinsurance 2011 Limited
Series 2011-I
Class 1
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$57,000
B+
May-11
United Services Automobile Association
Residential Reinsurance 2011 Limited
Series 2011-I
Class 2
US (HU, EQ, ST, WS, WF)
Indemnity
MMF
$33,000
B-
May-11
United Services Automobile Association
Residential Reinsurance 2011 Limited
Series 2011-I
Class 5
US (HU, EQ, ST, WS, WF)
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
Queen Street III Capital Limited
EU Wind
Industry Index
MMF
$150,000
B+
Aug-11
California Earthquake Authority
Embarcadero Reinsurance Ltd.
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
Tokio Marine & Nichido Fire Insurance Co., Ltd.
Kizuna Re Ltd.
Series 2011-1
JP TY
Indemnity
MTN
$160,000
Oct-11
AXA Global P&C
Calypso Capital Limited
Series 2011-1
EU Wind
Industry Index
MTN
€ 180,000
BB-
Oct-11
Munich Re
Queen Street IV Capital Limited
US HU, EU Wind
Industry Index
MMF
$100,000
BB-
Nov-11
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2011-3
Class V-F4
US HU
Industry Index
MMF
$80,000
Nov-11
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2011-3
Class V-X4
US HU, EU W
Industry Index
MMF
$50,000
Nov-11
United Services Automobile Association
Residential Reinsurance 2011 Limited
Series 2011-II
Class 1
US HU, EQ, ST, WS, WF
Indemnity
MMF
$100,000
Nov-11
United Services Automobile Association
Residential Reinsurance 2011 Limited
Series 2011-II
Class 2
US HU, EQ, ST, WS, WF
Indemnity
MMF
$50,000
Dec-11
National Union Fire Insurance Company of Pittsburgh
Compass Re Ltd.
Series 2011-1
Class 1
US HU, EQ
Industry Index
MMF
$75,000
BB-
Dec-11
National Union Fire Insurance Company of Pittsburgh
Compass Re Ltd.
Series 2011-1
Class 2
US HU, EQ
Industry Index
MMF
$250,000
BB-
Dec-11
National Union Fire Insurance Company of Pittsburgh
Compass Re Ltd.
Series 2011-1
Class 3
US HU, EQ
Industry Index
MMF
$250,000
B+
Dec-11
State Compensation Insurance Fund
Golden State Re Ltd.
Series 2011-1
US EQ
Modeled Loss
MMF
$200,000
BB+
Dec-11
SCOR Global P&C SE
Atlas VI Capital Limited
Series 2011-1
Class A
US HU, EQ
Industry Index
MTN
$125,000
B
Dec-11
SCOR Global P&C SE
Atlas VI Capital Limited
Series 2011-1
Class B
US HU, EQ
Industry Index
MTN
$145,000
B+
Dec-11
SCOR Global P&C SE
Atlas VI Capital Limited
Series 2011-2
Class A
EU Wind
Industry Index
MTN
€ 50,000
B
* Equity
66
Series 2011-I
Class A
B-
Fitch
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
Dec-11
Amlin AG
Tramline Re Ltd.
Series 2011-1
Class A
US HU, EQ, EU Wind
Industry Index
MMF
$150,000
Dec-11
Argo Re, Ltd.
Loma Reinsurance Ltd.
Series 2011-2
Class A
US HU, EQ
Industry Index
MMF
$100,000
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
California Earthquake Authority
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
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2012-1
Class V-AA3
US HU, EU Wind
Industry Index
MMF
$23,000
Feb-12
Swiss Reinsurance Company Ltd.
Successor X Ltd.
Series 2012-1
Class V-D3
US HU
Industry Index
MMF
$40,000
Feb-12
Munich Re
Queen Street V Re Limited
US HU, EU Wind
Industry Index
MMF
$75,000
Mar-12
Liberty Mutual Insurance Company
Mystic Re III Ltd.
Series 2012-1
Class A
US HU, EQ(ex CA)
Indemnity
MMF
$100,000
BB
Mar-12
Liberty Mutual Insurance Company
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
COUNTRY Mutual & North Carolina Farm Bureau Mutual
Combine Re Ltd.
Class B
US HU, EQ, ST, WS
Indemnity
MMF
$50,000
Ba3
Mar-12
COUNTRY Mutual & North Carolina Farm Bureau Mutual
Combine Re Ltd.
Class C
US HU, EQ, ST, WS
Indemnity
MMF
$50,000
Apr-12
Allianz Argos 14 GmbH
Blue Danube Ltd.
Series 2012-1
Class A
US, CB, MX HU, US, CAN EQ
Industry Index
MTN
$120,000
BB+
Apr-12
Allianz Argos 14 GmbH
Blue Danube Ltd.
Series 2012-1
Class B
US, CB, MX HU, US, CAN EQ
Industry Index
MTN
$120,000
BB-
Apr-12
Louisiana Citizens Property Pelican Re Ltd. Insurance Corporation
Series 2012-1
Class A
LA HU
Indemnity
MMF
$125,000
Apr-12
Mitsui Sumitomo Insurance Akibare II Ltd. Co., Ltd
Series 2012-1
Class A
JP TY
Modeled Loss
MMF
$130,000
BB
Apr-12
Citizens Property Insurance Everglades Re Ltd. Corporation
Series 2012-1
Class A
FL HU
Indemnity
MMF
$750,000
B+
May-12
Swiss Reinsurance Company Ltd.
Mythen Ltd.
Series 2012-1
Class A
US HU
Industry Index
MTN
$50,000
Ba3
May-12
Swiss Reinsurance Company Ltd.
Mythen Ltd.
Series 2012-1
Class E
US HU
Industry Index
MTN
$100,000
Ba3
May-12
Swiss Reinsurance Company Ltd.
Mythen Ltd.
Series 2012-1
Class H
US HU, EU Wind
Industry Index
MTN
$250,000
B2
Fitch
B-
B2
* Equity
67
Insurance-Linked Securities 2013
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Collateral
Size (thousands)
MIS
S&P
May-12
United Services Automobile Association
Residential Reinsurance 2012 Limited
Series 2012-I
Class 3
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
$50,000
BB-
May-12
United Services Automobile Association
Residential Reinsurance 2012 Limited
Series 2012-I
Class 5
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
$110,000
BB
May-12
United Services Automobile Association
Residential Reinsurance 2012 Limited
Series 2012-I
Class 7
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
$40,000
Jun-12
The Travelers Indemnity Company
Long Point Re III Ltd.
Series 2012-1
Class A
Northeast HU
Indemnity
MMF
$250,000
Jul-12
Munich Re
Queen Street VI Re Limited
US HU, EU Wind
Industry Index
MMF
$100.00
B
Jul-12
California Earthquake Authority
Embarcadero Reinsurance Ltd.
Series 2012-II
Class A
CAL EQ
Indemnity
MMF
$300.00
BB+
Sep-12
Hannover Re
Eurus III Ltd.
Series 2012-1
Class A
EU Wind
Industry Index
MTN
€ 100.00
BB-
Oct-12
Fund for Natural Disasters
MultiCat Mexico Limited
Series 2012-I
Class A
Mex EQ
Parametric
MMF
$140.00
B
Oct-12
Fund for Natural Disasters
MultiCat Mexico Limited
Series 2012-I
Class B
Mex HU Atlantic
Parametric
MMF
$75.00
B+
Oct-12
Fund for Natural Disasters
MultiCat Mexico Limited
Series 2012-I
Class C
Mex HU Pacific
Parametric
MMF
$100.00
B-
Oct-12
Munich Re
Queen Street VII Re Limited
US HU, EU Wind
Industry Index
MMF
$75.00
B
Nov-12
SCOR Global P&C SE
Atlas Reinsurance VII Limited
Class A
US HU, EQ
Industry Index
MTN
$60.00
BB-
Nov-12
SCOR Global P&C SE
Atlas Reinsurance VII Limited
Class B
EU Wind
Industry Index
MTN
€ 130.00
BB
Nov-12
Swiss Reinsurance Company Ltd.
Mythen Re Ltd.
Series 2012-2
Class A
US HU, UK Mortality
Industry Index
MTN
$120.00
B+
Nov-12
Swiss Reinsurance Company Ltd.
Mythen Re Ltd.
Series 2012-2
Class C
US HU
Industry Index
MTN
$80.00
B-
Nov-12
United Services Automobile Association
Residential Reinsurance 2012 Limited
Series 2012-II
Class 1
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
$155.00
BB+
Nov-12
United Services Automobile Association
Residential Reinsurance 2012 Limited
Series 2012-II
Class 2
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
$70.00
BB
Nov-12
United Services Automobile Association
Residential Reinsurance 2012 Limited
Series 2012-II
Class 3
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
$95.00
Nov-12
United Services Automobile Association
Residential Reinsurance 2012 Limited
Series 2012-II
Class 4
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
$80.00
Dec-12
National Union Fire Insurance Company of Pittsburgh
Compass Re Ltd.
Series 2012-1
Class 1
US HU, EQ
Industry Index
MMF
$400.00
Dec-12
Zurich American Insurance Company, Zurich Lakeside Re III Ltd. Insurance Company, Ltd.
US, CAN EQ
Indemnity
MMF
$270.00
B+
Mar-13
Nationwide Mutual Insurance Company
US HU, EQ
Indemnity
MMF
$270.00
BB-
* Equity
68
Caelus Re 2013 Limited
Series 2013-1
Class A
BB+
Fitch
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Size (thousands)
Issuer
Series
Class
Perils
Trigger
Collateral
Series 2013-1
Class A
FL HU
Indemnity
MMF
$250.00
New Madrid EQ
Indemnity
MMF
$300.00
MIS
Mar-13
Citizens Property Insurance Company
Everglades Re Ltd.
Apr-13
State Farm Fire and Casualty Company
Merna Re IV Ltd.
Apr-13
Nationwide Mutual Insurance Company
Caelus Re 2013 Limited
Series 2013-2
Class A
US HU, EQ
Indemnity
MMF
$320.00
Apr-13
North Carolina JUA/IUA
Tar Heel Re Ltd.
Series 2013-1
Class A
NC Hurricane
Parametric Index
MMF
$500.00
B+
Apr-13
Turkish Catastrophe Insurance Pool
Bosphorus 1 Re Ltd.
Series 2013-1
Class A
Turkey EQ
Industry Index
MMF
$400.00
BB+
May-13
Allstate Insurance Company
Sanders Re Ltd.
Series 2013-1
Class A
US HU, EQ
Industry Index
MMF
$200.00
BB+
May-13
Allstate Insurance Company
Sanders Re Ltd.
Series 2013-1
Class B
US HU, EQ
Indemnity
MMF
$150.00
BB
May-13
Louisiana Citizens Property Pelican Re Ltd. Insurance Company
Series 2013-1
Class A
LA HU
Indemnity
MMF
$140.00
May-13
American Coastal Insurance Company
Armor Re Ltd.
Series 2013-1
Class A
Florida HU
Indemnity
MMF
$183.00
BB+
May-13
Travelers Indemnity Company
Long Point Re III Ltd.
Series 2013-1
Class A
Northeast HU
Indemnity
MMF
$300.00
BB
May-13
Allianz Argos 14 GmbH
Blue Danube II Ltd.
Series 2013-1
Class A
US, CB, MX HU & US, CAN EQ
Industry Index
MTN
$175.00
BB+
May-13
United Services Automobile Association
Residential Reinsurance 2013 Limited
Series 2013-I
Class 11
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
$205.00
May-13
United Services Automobile Association
Residential Reinsurance 2013 Limited
Series 2013-I
Class 3
US HU, EQ, ST, WS, CAL WF
Indemnity
MMF
$95.00
B-
Jun-13
Assurant, Inc.
Ibis Re II Ltd.
Series 2013-1
Class A
US HU
Industry Index
MMF
$110.00
BB+
Jun-13
Assurant, Inc.
Ibis Re II Ltd.
Series 2013-1
Class B
US HU
Industry Index
MMF
$35.00
BB-
Jun-13
Assurant, Inc.
Ibis Re II Ltd.
Series 2013-1
Class C
US HU
Industry Index
MMF
$40.00
B
Jun-13
Munich Re
Queen Street VIII Re Limited
US HU, AUS CY
Industry Index, Modeled Loss
MMF
$75.00
Jun-13
Amlin AG
Tramline Re II Ltd.
US, CAN EQ
Industry Index
MMF
$75.00
Series 2013-1
Class A
S&P
Fitch
B
* Equity
69
Insurance-Linked Securities 2013
Appendix III Life & Health Catastrophe Bonds – Transaction Summary As of June 30, 2013 Source: Aon Benfield Securities
70
Aon Benfield Securities
Summary of Catastrophe Bonds — December 1996 through June 2013 Issuance Date
Beneficiary
Issuer
Series
Class
Perils
Trigger
Size ($MM)
S&P
Extreme Mortality
Index
$400,000
A+
Dec-03
Swiss Reinsurance Company, Ltd.
Vita Capital Ltd.
Series 1
Apr-05
Swiss Reinsurance Company, Ltd.
Vita Capital II Ltd.
Series 1
Class B
Extreme Mortality
Index
$62,000
A-
Apr-05
Swiss Reinsurance Company, Ltd.
Vita Capital II Ltd.
Series 1
Class C
Extreme Mortality
Index
$200,000
BBB+
Apr-05
Swiss Reinsurance Company, Ltd.
Vita Capital II Ltd.
Series 1
Class D
Extreme Mortality
Index
$100,000
BBB-
Apr-06
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
Swiss Reinsurance Company, Ltd.
Vita Capital III Ltd.
Series 1
Class B
Extreme Mortality
Index
$90,000
A
Dec-06
Swiss Reinsurance Company, Ltd.
Vita Capital III Ltd.
Series 2
Class B
Extreme Mortality
Index
$50,000
AAA
Dec-06
Swiss Reinsurance Company, Ltd.
Vita Capital III Ltd.
Series 3
Class B
Extreme Mortality
Index
€ 30,000
AAA
Jan-07
Swiss Reinsurance Company, Ltd.
Vita Capital III Ltd.
Series 4
Class A
Extreme Mortality
Index
$100,000
AAA
Jan-07
Swiss Reinsurance Company, Ltd.
Vita Capital III Ltd.
Series 5
Class A
Extreme Mortality
Index
$100,000
AAA
Jan-07
Swiss Reinsurance Company, Ltd.
Vita Capital III Ltd.
Series 5
Class B
Extreme Mortality
Index
$50,000
AAA
Jan-07
Swiss Reinsurance Company, Ltd.
Vita Capital III Ltd.
Series 6
Class A
Extreme Mortality
Index
€ 55,000
AAA
Jan-07
Swiss Reinsurance Company, Ltd.
Vita Capital III Ltd.
Series 6
Class B
Extreme Mortality
Index
€ 55,000
AAA
Jan-07
Swiss Reinsurance Company, Ltd.
Vita Capital III Ltd.
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
Swiss Reinsurance Company, Ltd.
Vita Capital IV Ltd.
Series 1
Class E
Extreme Mortality
Index
$75,000
BB+
May-10
Swiss Reinsurance Company, Ltd.
Vita Capital IV Ltd.
Series III
Class E
Extreme Mortality
Index
$50,000
BB+
Oct-10
Swiss Reinsurance Company, Ltd.
Vita Capital IV Ltd.
Series III
Class E
Extreme Mortality
Index
$100,000
BB+
Oct-10
Swiss Reinsurance Company, Ltd.
Vita Capital IV Ltd.
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
Swiss Reinsurance Company, Ltd.
Kortis Capital Ltd.
Series 2010-1
Class E
Longevity
Index
$50,000
BB+
Apr-11
Aetna Life Insurance Company
Vitality Re II Limited
Series 2011-1
Class A
Health
Indemnity - MBR
$110,000
BBB
Apr-11
Aetna Life Insurance Company
Vitality Re II Limited
Series 2011-1
Class B
Health
Indemnity - MBR
$40,000
BB+
Aug-11
Swiss Reinsurance Company Ltd.
Vita Capital IV Ltd.
Series V
Class D
Extreme Mortality
Index
$100,000
BBB-
Aug-11
Swiss Reinsurance Company Ltd.
Vita Capital IV Ltd.
Series VI
Class E
Extreme Mortality
Index
$80,000
BB+
Jan-12
Aetna Life Insurance Company
Vitality Re III Limited
Series 2012-1
Class A
Health
Indemnity - MBR
$105,000
BBB+
Jan-12
Aetna Life Insurance Company
Vitality Re III Limited
Series 2012-1
Class B
Health
Indemnity - MBR
$45,000
BB+
Jul-12
Swiss Reinsurance Company Ltd.
Vita Capital V Ltd.
Series 2012-I
Class D-1
Extreme Mortality
Index
$125.00
BBB-
Jul-12
Swiss Reinsurance Company Ltd.
Vita Capital V Ltd.
Series 2012-I
Class E-1
Extreme Mortality
Index
$150.00
BB+
Jan-13
Aetna Life Insurance Company
Vitality Re IV Limited
Series 2013-1
Class A
Health
Indemnity - MBR
$105.00
BBB+
Jan-13
Aetna Life Insurance Company
Vitality Re IV Limited
Series 2013-1
Class B
Health
Indemnity - MBR
$45.00
BB+
71
Insurance-Linked Securities 2013
Appendix IV Summary of Sidecar Issuance As of June 30, 2013 Source: Aon Benfield Securities
72
Aon Benfield Securities
Summary of Sidecar Issuance Size ($Millions)
Sidecar
Principal Sponsor
Inception
Line of Business
Top Layer Re
Renaissance Re, SF
Dec-99
High Excess U.S. Property Cat
Olympus Re
White Mountains Re
Dec-01
Property Cat, Property Risk, Retro, and Marine
500.0
DaVinci Re
Renaissance Re, SF
Dec-01
Property Cat Reinsurance
600.0
Rockridge Re
Montpelier Re
Jun-05
High Excess Cat Retrocessional
Blue Ocean Re
Montpelier Re
Dec-05
Property Cat Retrocessional
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
Hannover Re
Dec-05
Property Cat, Property Risk, Aviation and Marine
370.0
Olympus Re II
White Mountains Re
Jan-06
Property Cat, Property Risk, Retro and Marine
156.0
Petrel Re
Validus
May-06
Marine And Offshore Energy Reinsurance Contracts
125.0
Starbound Re
Renaissance Re
May-06
Short-Tailed Property and Marine
310.5
Bay Point Re
Harbor Point
Jun-06
U.S. Property, Marine, Retro, and Workers’ Comp
150.0
Sirocco Re
Lancashire
Jun-06
Marine and Offshore Energy Insurance Contracts
75.0
Timicuan Re
Renaissance Re
Jul-06
Reinstatement Premium Protection
70.0
Concord Re
Lexington Insurance Co
Aug-06
U.S. Commercial Property
Mont Fort Re
Flagstone Re
Aug-06
Peak Zone And ILW
Cyrus Re
XL Capital
Nov-06
Property Cat Reinsurance and Retrocessional
635.0
Panther Re
Hiscox
Dec-06
Property Cat Reinsurance
360.0
Syncro Ltd.
Lloyd’s #4242 (Chaucer)
Dec-06
Property Cat Reinsurance
100.0
Norton Re
Brit Insurance
Dec-06
Property Cat Retrocessional
107.7
New Point Re
Harbor Point
Dec-06
Property Cat Retrocessional
250.0
Triomphe Re
Paris Re
Dec-06
Property Cat Retrocessional
185.0
Sector Re
Swiss Re
Jan-07
Property Cat, Aviation
220.0
MaRI Ltd.
ACE
Jan-07
Property Cat Reinsurance
400.0
Syndicate 6105
Ark Underwriting
Jan-07
Property Cat Reinsurance
40.0
Syndicate 6104
Hiscox
Jan-07
Property Cat Reinsurance
69.0
Syndicate 6103
Mapfre Ltd.
Jan-07
Property Cat Reinsurance
78.6
Bridge Re
Swiss Re
Apr-07
Property Cat, Aviation
182.5
Starbound Re II
Ren Re
Jun-07
Property Cat Reinsurance
341.5
Mont Gele Re
Flagstone Re
Jul-07
Property Cat Reinsurance
Norton Re II
Brit Insurance
Dec-07
Property Cat Retrocessional
Sector Re II
Swiss Re
Apr-08
Property Cat, Aviation
150.0
Cyrus Re ll
XL Capital
Dec-07
Property Cat Reinsurance and Retrocessional
140.0
New Point Re II
Harbor Point
Dec-07
Property Cat Retrocessional
100.0
Globe Re
Hannover Re
May-08
Property Cat Retrocessional
133.0
Kaith/K6
Hannover Re
Mar-09
Property Cat, Property Risk, Aviation and Marine
180.0
Timicuan Re II
Renaissance Re
Jun-09
Property Cat Retrocessional, Primarily Florida
100.0
90.9 300.0
730.0 60.0
60.0 118.2
60.4
73
Insurance-Linked Securities 2013
Summary of Sidecar Issuance Size ($Millions)
Sidecar
Principal Sponsor
Inception
Line of Business
Fac Pool Re
Hannover Re
Sep-09
Worldwide Fac
AlphaCat Re
Validus
May-11
Property Cat Reinsurance and Retrocessional
180.0
DaVinci Re*
Renaissance Re
Jun-11
Property Cat, Specialty
100.0
Accordion Re
Lancashire Re
Jul-11
Property Cat
200.0
New Point Re IV
Alterra
Jul-11
Property Cat Retrocessional
225.0
AlphaCat Re 2011*
Validus
Dec-11
Property Cat Reinsurance and Retrocessional
71.0
Upsilon Re
Renaissance Re
Jan-12
Property Cat Retrocessional
73.7
SPS 20881
Catlin
Jan-12
Various lines (Syndicate 2003 quota share)
77.5
SPS 61111
Catlin
Jan-12
Various lines (Syndicate 2003 quota share)
93.0
Catlin
Jan-12
Various lines (Syndicate 2003 quota share)
41.9
SPS 61121 AlphaCat Re 2011*
60.0
Validus
Feb-12
Property Cat Reinsurance and Retrocessional
PacRe
Validus
Mar-12
Property Cat Reinsurance (top layer)
Accordion Re*
Lancashire
Apr-12
Property Cat
75.0
Timicuan Re III
Renaissance Re
Jun-12
Property Cat Retrocessional, primarily Florida
73.7
New Point Re V
Alterra
Jun-12
Property Cat Retrocessional
AlphaCat Re 2012
Validus
Jun-12
Property Cat Reinsurance and Retrocessional
70.0
Saltire Re I
Lancashire Re
Nov-12
Combined exposure UNL aggregate reinsurance product
250
New Point Re V
Alterra Capital
Dec-12
Property cat retrocessional
Upsilon Re II
RenaissanceRe
Jan-13
Worldwide aggregate retrocessional reinsurance
185
Harambee Re
Argo Group
Jan-13
Portfolio for both insurance and reinsurance
N/A
AlphaCat Re 2013
Validus
Jan-13
Worldwide property catastrophe reinsurance and retrocession
230
Mt. Logan Re
Everest Re
Jan-13
Worldwide property catastrophe reinsurance
250
Lorenz Re
PartnerRe
Mar-13
Worldwide property catastrophe reinsurance for select accounts
75
Altair Re
ACE
Apr-13
Worldwide property catastrophe insurance and reinsurance
95
2
* Additional equity raise for existing vehicle 1
Converted at 1 £ = $1.55 as of January 1, 2012. Whole account quota share of the Catlin Syndicate at Lloyd's (Syndicate 2003)
2
Net of Validus' investment reduction
74
39.9 500.0
210.0
37
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Aon Benfield Securities is providing Insurance-Linked Securities 2013 (ILS 2013) for informational purposes only. ILS 2013 is not intended as advice with respect to any specific situation, and should not be relied upon as such. In addition, readers should not place undue reliance on any forwardlooking statements. Aon Benfield Securities undertakes no obligation to review or update any such statements based on changes, new developments or otherwise. ILS 2013 is intended only for designated recipients, and it is not to be considered (1) an offer to sell any security, loan, or other financial product, (2) a solicitation or basis for any contract for purchase of any securities, loan, or other financial product, (3) an official confirmation, or (4) a statement of Aon Benfield Securities or its affiliates. With respect to indicative values, no representation is made that any transaction can be effected at the values provided and the values provided are not necessarily the value carried on Aon Benfield Securities’ books and records. Discussions of tax, accounting, legal or actuarial matters are intended as general observations only based on Aon Benfield Securities’ experience, and should not be relied upon as tax, accounting, legal or actuarial advice. Readers should consult their own professional advisors on these matters as Aon Benfield Securities does not provide such advice. Aon Benfield Securities makes no representation or warranty, whether express or implied, that the products or services described in ILS 2013 are suitable or appropriate for any issuer, investor or participant, or in any location or jurisdiction. The products and services described in ILS 2013 are complex and speculative, and are intended for sophisticated issuers, investors, or participants capable of assessing the significant risks involved. Except as otherwise noted, the information in the ILS 2013 was compiled by Aon Benfield Securities from sources it believes to be reliable. However, Aon Benfield Securities makes no representation or warranty as to the accuracy, reliability or completeness of such information, and the information should not be relied upon in making business, investment or other decisions. Aon Benfield Securities and/or its affiliates may have independent business relationships with, and may have been or in the future will be compensated for services provided to, companies mentioned in the ILS 2013.
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