BSX’s roster of ILS gets $670m boost

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The Bermuda Stock Exchange’s $5 billion-plus listing of insurance-linked securities has been bolstered by $670 million of repeat business.

Compass Re Ltd’s $400 million catastrophe bond was listed, along with Lakeside Re III Ltd, the vehicle for a new $270 million catastrophe bond, the BSX announced on Friday.

National Union Fire Insurance Co of Pittsburgh, a subsidiary of American International Group (AIG), will benefit from the coverage provided by Compass Re Ltd.

The Series 2012-1 notes will run for two years and become due on January 8, 2015.

The new bond will boost the programme Compass Re Ltd launched a year ago with the $575 million of Series 2011-1 notes that also mature in two years and provide US hurricane and earthquake coverage for the AIG unit.

Lakeside Re III is a Bermuda special purpose insurer (SPI) that will renew and expand earthquake-related coverage for Zurich Insurance.

Its predecessor Lakeside Re II matures at the end of 2012 and Lakeside Re III will run for the next three years, with the notes becoming due on January 8, 2016. The bond will provide a source of earthquake reinsurance for the US and Canada.

The single tranche of notes it is issuing have received a preliminary credit rating of “B+” from Standard & Poor’s.

Investors in catastrophe bonds generally receive attractive yields in exchange for bearing the risk of a specified natural disaster. The cat bond may be triggered if insured losses receive a specified level, in which case investors’ capital can be wiped out. Investor interest in the bonds stems from the relatively high yields and the lack of correlation with financial markets.

The BSX passed $5 billion of listed insurance-linked securities — which include industry loss warranties and sidecars, as well as catastrophe bonds — in July this year.

The BSX can now lay claim to about a third of the global cat bond market. The influx of capital followed the implementation of the SPI classification by the Bermuda Monetary Authority three years ago and has helped the Island claim a large share of offshore ILS business that had traditionally been dominated by rival the Cayman Islands.

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Published Dec 31, 2012 at 8:00 am (Updated Dec 30, 2012 at 4:12 pm)

BSX’s roster of ILS gets $670m boost

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