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Converium Cat - Catastrophe Securitization Program


Background

Converium (formerly Zurich Re), a leading global provider of property and catastrophe reinsurance, was seeking to raise an alternative form of retrocessional reinsurance cover (the Program) from the capital markets to protect against low-frequency, high-severity claims from earthquakes and hurricanes in the United States and windstorms in European markets. Given Converium's lack of capital markets knowledge and structuring experience, it retained RISConsulting to assist it in developing the structure for its first-ever Cat bond transaction and in selecting the investment bank group to lead the issue.

The Solution

RISConsulting worked closely with Converium to select the appropriate underlying property and catastrophe exposures for the Program, used loss data generated by third-party software providers to estimate the value of probable losses to the Program, and developed a customized structuring tool to enable Converium to design an optimal risk transfer structure. Having structured the desired transaction, RISConsulting assisted Converium in selecting an investment bank to underwrite the transaction and then assisted in the distribution process and placement of the risk in the market.

The Result

Converium raised $166 million of capacity through the issue of securities to capital markets investors. The securities were issued by Trinom Ltd., a Bermuda-based special-purpose company, and consisted of $60 million of Class A-1 notes, $97 million of Class A-2 notes and $4.9 million of preference shares. The transaction was concluded in June 0f 2001.

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