Friday, May 28, 2010

Hurricane Watch: As Insurers Continue to Offload Risk; Coastal Residents Seem Unaware

More reinsurers packaging risk in a neat little bundle. And getting rid of it.
From Structured Finance:

Swiss Re Issues $150mln Insurance Linked Securitization

Swiss Re Capital Markets completed a $150 million of insurance linked securities issued by Blue Fin Ltd. The structure covers U.S. hurricane and earthquake risk.

Blue Fin is a Cayman Islands exempted company and the transaction is sponsored by Allianz Argos 14 GmbH, a wholly owned subsidiary of Allianz SE.

Swiss Re Capital Markets acted as co-structuring agent and joint bookrunner of Blue Fin Ltd. to place this three year securitization. This is the third issuance using the Blue Fin shelf program.

The securities were issued in two tranches, $90 million of Series 3 Class A notes and $60 million of Series 3 Class B notes. The notes, which have been scheduled to be redeemed in May 2013, have received a rating of “B-“ and “BB,” respectively, by Standard & Poor’s.

AIR Worldwide Corp. performed the expert risk modeling analysis. The three year notes, which will use Treasury money market funds for its collateral, are based on a modeled loss trigger mechanism.

Reuters has more detail:

Insurer Allianz (ALVG.DE) has closed a third closed a third catastrophe bond under its Cayman Island-based special purpose vehicle Blue Fin Ltd to cover peak U.S. peril risk - the ninth cat bond to close before the start of the U.S wind season.

This new $150 million series of Blue Fin will provide Allianz with per-occurrence and aggregate protection against U.S. hurricane and earthquakes for three years.

The $90 million Class A notes was rated B- by Standard & Poor's (S&P) and offers a coupon of 14 percent to investors. This tranche will cover against U.S. hurricane and quake on an occurrence basis.

Blue Fin's $60 million Class B tranche provides cover on an aggregate basis for the first time in the cat bond series and offers a coupon of 9.25 percent. This tranche was rated BB by S&P. Both tranches of risk used U.S. money market fund yields.

"The Blue Fin bond provides multi-year protection at similar rates as traditional reinsurance from a diversifying source on a fully collateralised basis," Allianz said in a statement on Thursday.

Blue Fin's tranche B has been structured to provide protection against combinations of medium-sized and large events - the first time Allianz has used this type of structure in a cat bond....MORE

Finally, from Ken Kaye's Storm Center:

...Meanwhile, a new Mason-Dixon poll released today shows:

-- 45 percent of coastal residents between Virginia and Texas said they don’t feel vulnerable to a hurricane or related tornado or flooding;

-- 47 percent have no hurricane survival kit;

-- 13 percent said they might not or would not evacuate even if ordered to leave;

-- 74 percent have taken no steps to make their homes stronger;

-- 36 percent have no family disaster plan;

-- 17 percent of Floridians said they would not evacuate even if ordered.

The poll surveyed 625 adults who live within 30 miles of the coast between Virginia and Texas.

We'll come back to those Floridians and how the state could become insolvent this year.