The new catastrophe bond ("cat bond") transfers to investors the risk of loss from hurricane and earthquake events in the US, based on a modeled loss trigger mechanism. The securities issued by Blue Fin Ltd. are denominated in US dollars and offer investors a coupon of 13.5 percent above the applicable reference rate (3 month LIBOR). The tranche is scheduled to be redeemed in April 2012, and has received a rating of BB- by Standard & Poor’s.
"Cat bonds are an important element of our risk management approach, supplementing traditional reinsurance solutions", explains Amer Ahmed, CRO of the reinsurance division of Allianz SE. The cat bond provides multi-year cover and allows Allianz to better diversify reinsurance cover and counterparty risk.
The cat bond's structure is an innovation for the cat bond market as the transaction proceeds will be invested in floating rate notes issued by the Kreditanstalt für Wiederaufbau (KfW), a German public law institution rated AAA/Aaa/AAA by S&P, Moody’s and Fitch. KfW benefits from an explicit guarantee by the Federal Republic of Germany in accordance with the KfW Law.
"We were looking for a collateral that satisfies investors’ needs, as well as our requirements in terms of protection and quality of security", says Insa Adena, Head of Advanced Risk Intermediation at Allianz SE’s reinsurance division. "The new structure is appealing to both investors and the sponsor because it provides a strong alignment of interest. It is easy to understand, transparent, and operationally easy to handle for all parties involved."
Since 2007 Allianz sponsored three cat bonds: Blue Wings, Blue Fin (Series 1) and Blue Coast.
Allianz successfully closes innovative catastrophe bond covering hurricane and earthquake risks in the US
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All the securities referred to herein having been sold, this announcement is a matter of record only. The notes referred to herein have not been and will not be registered under the securities laws of any jurisdiction, and any offer or sale thereof may only be made in a transaction exempt from registration.
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