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First Cat Bond to Combine Risks of Two Reinsured Parties

Posted on 26 Mar 2012

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Swiss Re Capital Markets today announced the securitization of $200 million in multi-peril annual aggregate indemnity protection via Combine Re Ltd. (“Combine Re”), a newly-established catastrophe bond vehicle. This is the first catastrophe bond combining the risk of two reinsured parties into a single transaction and marks an important innovation in better enabling insurers to access the catastrophe bond market. 

Swiss Re has entered into a retrocession transaction with Combine Re to receive payments following the aggregation of insurance losses of the two reinsured parties, COUNTRY Mutual Insurance Company®, with home offices in Bloomington, Illinois, and North Carolina Farm Bureau Mutual Insurance Company, Inc., with home offices in Raleigh, North Carolina. 

"This transaction is a confirmation of our client-centered approach to providing innovative and efficient risk-transfer solutions," says Markus Schmutz, managing director, Swiss Re Capital Markets.

Through Combine Re, Swiss Re has securitized USD 200 million of risk based on the aggregate ultimate net loss of the two reinsured parties from the U.S. perils of severe thunderstorm, hurricane, earthquake and winter storm.

The structure of the Combine Re program presents investors with a broad range of risk and return profiles to offer investment grade and sub-investment grade classes of notes.  Combine Re includes three tranches: USD 100 million of Class A notes, rated at investment grade ("Baa1 (sf)") by Moody’s; USD 50 million of Class B notes, rated "Ba3 (sf)" by Moody’s; and USD 50 million of unrated Class C notes.

"The Combine Re transaction further develops the cat bond market by providing investors with a true range of risk and return profiles, while providing both COUNTRY Mutual and the North Carolina Farm Bureau with significant annual aggregate protection, designed to respond during years of sustained multi-peril insurance losses," said Schmutz. "Catastrophe bonds continue to be a cornerstone of Swiss Re’s own risk management strategy and Swiss Re's extensive ILS capabilities have harnessed the benefits for both COUNTRY Mutual and the North Carolina Farm Bureau."

Independent third-party risk analysis for the notes was provided by AIR Worldwide.

The Combine Re notes were sold in a private placement pursuant to Rule 144A of the U.S. Securities Act of 1933, as amended, (the “Securities Act”) and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to the registration requirements of the Securities Act and applicable state securities laws.