Swiss Re Capital Markets, a division of the global reinsurance giant, has announced the successful structuring and placement of $775 million in insurance-linked securities by Ursa Re II Ltd.

The catastrophe bond will be used for the protection of the California Earthquake Authority (CEA).

CEA protects policyholders in California against earthquakes and its hoped this transaction will help underpin its claims paying ability.

This is reportedly the largest catastrophe bond issuance of 2020 and the largest transformer structure in the history of the ILS market.

CEA entered into two reinsurance agreements with Swiss Re, who, as a transformer, transferred the risk via two retrocession agreements to Ursa Re II to receive protection on an annual aggregate, indemnity basis, against residential home earthquake damage in the state.

Ursa Re II is a Bermuda exempted company licensed and registered as a special purpose insurer.

Swiss Re Capital Markets underwrote the transaction through two classes of principal-at-risk variable rate notes issued by Ursa Re II.

Ursa Re II collateralised its liabilities under the retrocession agreements via the issuance of $425 million Class AA Notes and $350 million Class D Notes to investors.

Both classes of notes have three loss occurrence periods starting 17 October 2020 and ending 30 November 2023.

“Swiss Re’s mission as a company is to make the world more resilient. We’re delighted to partner with CEA which has been helping to protect Californians from the financial consequences of earthquakes for almost 25 years,“ said Jonathan Isherwood, Swiss Re’s CEO Reinsurance Americas and Regional President.

“Only around 13% of Californians who purchase residential insurance also have earthquake protection. It’s not a matter of if, but when, the next one strikes. This transaction supports CEA’s ability to extend financial protection to a greater number of California residents who are highly exposed to earthquakes.“

Jean-Louis Monnier, Head of Retro & ILS Structuring at Swiss Re Capital Markets, added “Swiss Re is pleased to provide continued support to CEA. Despite uncertainty around COVID-19, the transaction was well received by investors, ultimately allowing the issuance size to more than triple from the initial guidance.”

“This was the largest catastrophe bond issuance in 2020 thus far and its success clearly displays the health of the ILS market and investors’ commitment to providing efficient collateralized capacity where most required.“

Source: Reinsurance News