Chartis, a property-casualty and general insurance organization, has entered into a reinsurance transaction with Bermuda-based purpose insurer, Lodestone Re, which will provide $425m of protection to Chartis against US hurricanes and earthquakes.
This represents an increase from the $250m of protection originally sought by Chartis. To fund its obligations to Chartis, Lodestone Re issued a catastrophe bond in two tranches $175m of Class A notes and $250m of Class B notes.
According to Chartis, the transaction that has been closed and it provides Chartis with fully collateralized coverage against losses from US hurricanes and earthquakes on a per-occurrence basis until May 2013 using an index trigger with state-specific payment factors.
Risk analysis for the transaction is based on risk management solution’s (RMS) hurricane model version 9.0 and RMS North America Earthquake Model Version 9.0.
Kristian Moor, president and CEO of Chartis, said: “As part of our first effort to obtain reinsurance coverage supported by capital market instruments, this transaction represents another important milestone in Chartis’ pursuit of increasing financial flexibility and enhancing our risk management capabilities.”
Lodestone Re is a special purpose insurer, incorporated under the laws of Bermuda, which has established a program structure enabling potential future catastrophe bond issuances.