To cover the risk of earthquakes in California over next three years
Swiss insurer Zurich Financial Services Group (Zurich) through its subsidiaries, Zurich American Insurance Company and Zurich Insurance Company, has obtained a $225m catastrophe excess of loss reinsurance protection from Lakeside Re II to cover the risk of earthquakes in California over the next three years.
Lakeside Re II, in turn, has issued to the capital markets principal at-risk variable rate notes linked to the risk. The catastrophe bond has a floating coupon consisting of a fixed 7.75% plus a variable investment yield received by Lakeside Re II on the underlying assets.
The reinsurance transaction is a replacement of the expiring 2006 Lakeside Re transaction. Lakeside Re II is a special purpose reinsurance company domiciled in the Cayman Islands.