Tuesday, March 23, 2021

"First volcanic eruption cat bond issued for the Danish Red Cross"

Some thought I was joking with the volcano insurance rider in March 17's "RISK: "The potential economic impact of volcano alerts"" but then Iceland tries to set itself on fire in an obvious insurance scam and now this. From Artemis, March 22:

The very first catastrophe bond covering pure volcanic eruption risk has now been completed, with a $3 million privately placed issuance brought to market by Replexus and Howden Capital Markets and backed by leading cat bond investors for the Danish Red Cross.

The catastrophe bond covers the risk of eruption of 10 volcanoes across three continents and we’re told raised $3 million from specialist cat bond investors, with the capital set to be used to support aid in the aftermath of an eruption by sponsor the Danish Red Cross.

Initial investors in the volcano cat bond included insurance-linked securities (ILS) specialist managers Plenum Investments, Schroder Investment Management and Solidum Partners.

Issued using Replexus’ Guernsey domiciled Dunant Re IC Limited, the volcanic eruption catastrophe bond features a parametric trigger based on plume heights, as anticipated.

The volcano cat bond from the Red Cross has been a long time in the making, having first come to light in late 2018.

We understand the deal nearly got done a year ago, but funding challenges and then the global pandemic postponed this innovative issuance until now....