The just-completed first cat indemnity bond sponsored by asset management giant Blackstone is a new milestone for the insurance-linked securities (ILS) market as it expands the role of cat bonds for asset managers seeking protection from peak cat risk, according to Swiss Re’s Jean-Louis Monnier.
Swiss Re Capital Markets announced today that it has successfully structured and issued US$250 million of insurance-related securities to insure certain real estate funds managed or controlled by affiliates of Blackstone Inc.
As we reported yesterday, the new Wrigley Re Ltd. (Series 2023-1) cat bond transaction closed yesterday, marking the completion of Blackstone’s first cat bond which will protect it on an indemnity triggered basis.
Previously, the asset manager sponsored the $50 million Wrigley Re Ltd. (Series 2021-1) catastrophe bond transaction, which provided Blackstone with protection against California earthquake losses on a parametric triggered basis for approximately 3 years (ending June 2024).
But this new Wrigley Re 2023-1 cat bond deal is Blackstone’s first indemnity cat bond, which Monnier noted was a landmark deal for the cat bond and ILS markets.
Monnier, Head of Swiss Re ILS, commented: “Swiss Re Capital Markets is proud to have achieved the milestone with the structure of Blackstone’s first claims issue.
“This transaction is the result of a partnership between Blackstone and ILS investors to develop a new solution to the challenges of asset managers and expand the boundaries of the ILS market.
“This is a milestone for the ILS market to realize its potential as an efficient provider of peak hazard capacity.”
In fact, Swiss Re pointed to two other milestones for Blackstone’s first indemnity-triggered cat bond.
It is the first corporate cat bond to underwrite specified storm risk on an indemnity basis and the first corporate cat bond to offer protection in multiple countries.
With the new bond offering, Blackstone gained coverage for specified storm and earthquake risks in the U.S. and Canada.
Finally, another innovative feature of Wrigley Re’s 2023-1 cat bond deal is that the deal introduces a risk-based premium adjustment mechanism, allowing adjustments to be made to accommodate changes in the risk of the underwriting real estate portfolio.
All of these features are extremely valuable to corporate cat bond originators and any asset managers looking to sponsor cat bonds, as they provide greater flexibility for such transactions.
As we said in our report on cat bonds yesterday, Blackstone is one of the most established asset managers in terms of insurance and risk management, but the structural innovations in its latest cat bond deal apply to many types of corporate cat bond originators, as well as asset managers looking to provide protection against possible peak risks to their portfolios.
You can read all about the Wrigley Re Ltd. (Series 2023-1) cat bond and all other cat bonds ever issued in the Artemis Transactions Directory.