General Insurance Article - Completion of Industry-first Catastrophe Bond, Azzurro Re

 Sponsored by UnipolSai, Azzurro Re was structured and placed by WCMA in collaboration with Willis Group’s reinsurance division, Willis Re. It provides UnipolSai, one of the largest buyers of Italian earthquake cover, with €200 million of fully collateralized protection against earthquake risk and ensuing perils in Italy and neighbouring countries for three-and-a half years.

  

 The structure features an indemnity trigger on a per occurrence basis and mirrors the traditional reinsurance terms to ensure integration within the overall property catastrophe reinsurance program of UnipolSai.

  

 Azzurro Re is the first catastrophe bond for UnipolSai. It also marks the first catastrophe bond exposed to European risk issued in 2015. 

  

 Investors welcomed the transaction. More than twenty supported the transaction, which was oversubscribed and upsized from the initial €150 million. The notes pay an annual risk spread of 2.15%, a record low for a first time European primary insurance catastrophe bond sponsor of first event indemnity-trigger principal-at-risk notes.

  

 Commenting on the deal, Marco Sordoni, Head of Reinsurance, UnipolSai, said:

 “Azzurro Re is an important transaction for UnipolSai and supports our long-term development strategy across the international markets as well as in Italy. We are also proud to have sponsored Azzurro Re as an industry-first transaction for the catastrophe bond market.

  

 “UnipolSai is establishing relationships with investors as part of our long-term strategy to access the spectrum of global capital markets should our future reinsurance capacity needs increase. With the current low penetration rate of earthquake insurance in Italy and wider international markets, we have proactively sponsored this transaction in anticipation of our potential growth in exposure. We value the reduction in post-event counterparty risk from the fully collateralized cover and we continue to work on other innovative risk transfer solutions as we to look to develop our international capabilities.”

  

 Tony Melia, CEO of Willis Re International, said:

 “Azzurro Re demonstrates UnipolSai’s leadership in the international reinsurance market as well as Willis’s leadership position in structuring complex and advanced risk transfer solution for our international clients. We are delighted to have supported UnipolSai in its effort to engage successfully with insurance-linked securities investors as part of their long-term development strategy.

  

 “Azzurro Re is a clear demonstration of the continued trend for diversified reinsurance buying, with buyers restructuring their reinsurance programs to better integrate ILS capacity, ultimately to improve performance and efficiency gains for the benefit of policyholders as well as shareholders. We look forward to delivering future results alongside WCMA across new risks and territories.”

  

 William Dubinsky, Managing Director and Head of ILS, WCMA, said:

 “This transaction demonstrates the continued investor appetite for catastrophe risk and highlights the strong interest for investment in diversifying perils. Alongside Willis Re we look forward to continue broadening the scope of products available to investors and also look forward to bringing the buyers of reinsurance more choice to diversify their sources of reinsurance capacity.”