SWISS RE SECURITISES $100M EARTHQUAKE RISK ON MEDITERRANEAN COAST

Swiss Re has announced a $100m securitisation against earthquake risk, mainly on the Mediterranean coast. The deal covers against earthquake damage in Turkey, Greece, Israel, Cyprus, and also Portugal. Swiss Re said it was the first time that earthquake risk in this geographical sector had been securitised. The deal consists of two equally sized tranches issued by Cayman Islands-based special purpose vehicle MedQuake Ltd, to which Swiss Re is retroceding the exposure. MedQuake is issuing a double B minus tranche at 355 basis points over three-month LIBOR, and a single B tranche at 510 basis points over three-month LIBOR. The first tranche has an expected loss rate of 1.89%, while the second has an expected loss rate of 3.0%. The notes cover the period May 2007 to May 2010 and are redeemable in June 2010, with payments based on a parametric index trigger. The private placement of the notes closed on May 31. Martin Bisping, head of retrocession and syndication at Swiss Re, said that the deal “allows Swiss Re to continue meeting the Mediterranean market’s increased demand for capital, and supports Swiss Re’s strategic goals of reducing earnings volatility through active risk management and generating economic profit growth through efficient capital allocation”.