Swiss Re bond lets investors bet on pandemics

New security offers protection against unexpectedly high death rates

Nov 29, 2009 @ 12:01 am

By Darla Mercado

Swiss Reinsurance Co. Ltd. last week introduced a $75 million catastrophe bond that covers extreme mortality risks.

The offering, which was sold through a private placement, guards against unexpectedly high mortality rates in the United States and the United Kingdom for five years.

This cat bond is the first of its kind to be structured using a probability model instead of using only historical data. The risk analysis predicted the likelihood of massive fatalities from swine flu in the United States and the United Kingdom.

However, it isn't the first time that Swiss Re has securitized these types of risks; it obtained some $1.4 billion in extreme mortality risk protection in other programs.

Catastrophe bonds give insurance companies and reinsurers the ability to pass on some catastrophic risk to investors so that the companies can remain solvent after a disaster.

Often, these securities are structured as floating-rate bonds and are tied to an event trigger. Investors can make a good return on their investment but may lose everything if a catastrophe triggers the bond, giving the principal to the insurer.

Vita Capital IV Ltd., a special-purpose vehicle in the Cayman Islands, issued the bond in the capital markets.

E-mail Darla Mercado at dmercado@investmentnews.com.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Female leaders highlighted as future of financial advice

InvestmentNews recognized 20 Women to Watch for their efforts to advance the financial advice industry.

Latest news & opinion

Merger mania: Why consolidation in the RIA space is about to explode

The pace is expected to pick up as big firms seek to get even bigger and older advisers look to cash out.

Voya Financial Advisors exposes more sensitive adviser information on its website

List of top advisers at the firm comes after Social Security numbers were put at risk.

Securities America hit with lawsuit seeking $18 million in damages

Firm is dealing with the fallout from a rogue broker it fired a year ago.

Brian Block continues his legal fight to stay out of prison

A judge denied Mr. Block's motion for a new trial, but he wants another day in court.

10 social media stars you're not following yet, but should be

Some of the great people using social media to discuss wealth management and financial advice who might not be on your radar.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print