Scor closes $200m cat bond

French insurer SCOR has closed its $200m catastrophe bond, the first cat bond issued worldwide in six months.

The multi-year property catastrophe agreement with Atlas V Capital provides with protection for exposures to earthquakes and hurricanes in the USA and Puerto Rico.

The trigger is an industry loss warranty, based on state-level Property Claims Services (PCS) insured industry loss estimates, further distributed to county level by modelling firm AIR Worldwide. Events are covered for the risk period from 20 February 2009 to 19 February 2012.

The bond is divided into three series of notes:

• $50m Series 1 (rated B+ by Standard & Poor’s),
• $100m Series 2 (B+) and
• $50m Series 3 (B).

The notes collectively offer blended coverage for subsequent events.

Scor claimed the Atlas V cat bond sets new transparency and security standards for investors. It applies an innovative new structure through:

• improvements in managing counterparty risk for SCOR and investors by employing a much-enhanced total return swap structure;
• full and permanent transparency regarding the asset development of the collateral for investors;
• US-government-backed debt obligations as the underlying securities;
• top-up “margining" facility by the total return swap counterparty that guarantees that the collateral will constantly be replenished in any case of a drop in the underlying security.

Jean-Luc Besson, chief risk officer of SCOR, said, “The market has been awaiting this first new cat bond issue with revised structures for collateral management and disclosure. With the enhancements made to Atlas V, SCOR, being a regular user of the capital markets in parallel to the traditional retrocession market, demonstrates its prominent market role. We prove that stability together with innovation satisfies market demand even in today’s extremely challenging financial markets. In the context of the current retrocession market for natural catastrophe risks, this cat bond is a cost-effective and highly-secure financial mechanism, providing additional protection for the group’s US natural catastrophe risk exposures, further strengthening its capital shield."