4 NEWS


CITIZENS’ RECORD CAT BOND ILLUSTRATES CHEAPER COST OF PROTECTION


Everglades Re provides coverage on an annual aggregate basis over the


next three years,


protecting the insurer from multiple smaller storms. It was priced at a rate on line of 7.5 percent, less than half the 17.75 percent charged for the first Everglades bonds issued in 2012.


Citizens said that the increased coverage it has bought was due to the low cost of reinsurance in both the traditional and the alternative markets.


The price did increase along with the size of


the deal, proving that investors will not support such transactions at any price.


The deal’s size and significance to the market


meant that it demanded coverage in some of the mainstream business and financial press in a way that ILS deals rarely achieve. It illustrates the potential


of Florida Citizens has increased its reinsurance protection by 70 percent


Citizens Property Insurance Corporation, the Florida not-for-profit insurer, officially closed the largest catastrophe bond issuance currently on record in May in a deal that took advantage of very favourable


imagination of even the mainstream press in some quarters.


(continued from pervious page) Sartori said that Generali is considering


other perils such as quake and life, with the team having received a mandate from top management to develop a reinsurance-buying strategy that includes alternative capital.


Sartori explained that the Lion I Re


transaction also helps with the group’s push to improve its capital position in the face of Solvency II requirements.


“The transaction has improved the capital and solvency position


of the group. Fully


collateralised reinsurance delivers significant advantages in terms of Solvency II metrics— lowering the concentration risk we have into our reinsurance panels and minimising the credit risk charge we face within the group,” he added.


This sentiment was echoed by Sergio Balbinot, the chief insurance officer of Generali. “Leveraging the consolidation of the


group’s reinsurance implemented since


2013, this catastrophe bond allows us to further optimise the purchase of reinsurance protection while maintaining a good degree of flexibility and diversifying the panel of capacity providers in order to mitigate counterparty risk,” said Balbinot.


Alberto Minali, the group CFO of Generali,


added: “The success of this initiative further demonstrates that the capital markets appreciate the actions our group is undertaking to optimise its capital allocation in line with the strategic targets announced last year. For us it is a new step of utmost importance aimed at an efficient implementation of alternative risk transfer mechanisms where appropriate.”


Cory Anger, global head of ILS Structuring at


GC Securities, said: “In addition to being the first indemnity-triggered 144A Europe windstorm catastrophe bond and incorporating the latest structural


features of the cat bond market, Lion I Re pioneers a new methodology to allow


cedants to access the capital markets at any point the during calendar year but only pay an annual premium rate that adjusts to reflect the commensurate amount of risk contributed for such portion of a partial calendar year period.


“Such a feature opens the ability for cedants to access capital markets protection at


a


different time than their traditional renewal without paying excess premium. Additionally, defining Europe windstorm for the expansive European geography that was covered under the Lion I Re was carefully crafted in order to best extract such risk from an ongoing traditional reinsurance programme and was fully accepted by the investor base.


“We are honoured to have been selected to lead the structuring of, and jointly distribute, the Lion I Re notes to facilitate Generali’s centralisation and capital objectives,” Anger added. n


optimisation The the pricing and caught the third


$1.5 billion deal, which represented catastrophe


bond


the Everglades Re that


Florida’s shelf Citizens issuance under


programme, means Property


Corporation succeeded in increasing its overall reinsurance protection by almost 70 percent while spending less on its protection than it did in 2013.


Insurance the capital markets increasingly large chunks of programmes


from some of the world’s bigger cedants in an extremely cost-efficient way.


This is good for the market’s long-term


sustainability. It gives investors certainty and gives new investors confidence in the sector while also illustrating to other large cedants the potential of this sector as a means of risk transfer. n


to take


INTELLIGENT ILS JUNE 2014


www.intelligentinsurer.com


RICHARD CAVALLERI / SHUTTERSTOCK.COM


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