Swiss Re Places $120 Million in Catastrophe Notes

May 21, 2001

Swiss Re, the world’s second largest reinsurer, took an important step in reinsuring itself with the issuance and placement of $120 million in floating rate notes designed to provide protection against losses from Florida and Puerto Rico hurricanes and French windstorms.

Although the year 2000 saw a significant decrease in weather related property damage, the lessons of 1999, when insured losses from natural disasters caused over $30 billion in insured losses, haven’t been forgotten. Hurricanes and the freak storms which struck Europe at the end of the year contributed heavily.

The notes, issued in two tranches, are designed to protect Swiss Re against both perils, and have a new “cross-collaterization structure” which “provides a first-of-its-kind reinstatement that will provide Swiss Re with subsequent loss coverage for either peril immediately following a catastrophe which causes the company to incur losses and draw down on the original coverage.”

“The structure provides Swiss Re with first loss protection as well as providing a reinstatement against either peril,” stated David Colarossi, VP of Swiss Re Capital Markets. “Swiss Re can readily absorb a first loss. Although the likelihood of triggering the reinstatement is small, it provides real value to Swiss Re.”

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