With guidance provided by Swiss Re, German insurer Allianz Global Corporate and Specialty has successfully closed an innovative catastrophe bond to transfer the risk of severe river floods in Great Britain and earthquakes in Canada and the US, excluding California. This securitization, worth $150 million, is the first phase of a $1 billion program.
Blue Wings is the first insurance-linked securities program to provide cover against flood. In the event of the specified natural catastrophe, the program would pay a claim based on pre-defined parameters and calculated by risk modeling company Risk Management Solutions.
The loss caused by an earthquake in Canada or the US will be based on a modeled loss of a notional portfolio of exposures. In the event of an earthquake, if the notional modeled loss amount exceeds pre-defined attachment points, the noteholders will experience a reduction of their principal.
We are thrilled to launch this tranche, the first part of a $1 billion program that can be expanded to cover other risks, said Axel Theis, CEO at Allianz Global Corporate & Specialty. This is a flexible tool and an important step in risk transfer mechanisms of the future enabling us to manage and optimize our exposure to catastrophic events.
Allianz has stated that the bond was well received in the market, while Swiss Re noted that the transaction attracted considerable investor demand.