Castelnau Group Regulatory News (CGL)

27 Sep 2006 07:01

Catlin Group Limited27 September 2006 CATLIN PARTICIPATES IN INNOVATIVE NATURAL CATASTROPHE SECURITY HAMILTON, Bermuda - Catlin Group Limited ('CGL': London Stock Exchange), theinternational speciality property/casualty insurer and reinsurer, announces thatCatlin Insurance Company Ltd. of Bermuda ('Catlin Bermuda') intends, subject tocompletion of contractual arrangements, to enter a catastrophe swap agreementthat would provide it with coverage of up to US$200.25 million in the event of aseries of severe natural catastrophes. The innovative transaction would provide Catlin with competitively priced andfully collateralised protection against severe natural catastrophes. Thistransaction would complement the protection that Catlin already purchasesthrough the traditional reinsurance marketplace. The transaction, which is being brought to the securities market this week byABN AMRO London, would be the first publicly rated collateralised debtobligation ('CDO') of natural catastrophe risk. The catastrophe bond is thoughtto be the first of its kind to offer very low-risk/low-volatility investors,such as pension funds and life insurers, the diversification and yield benefitsof natural catastrophe exposure. This new class of security has been developed in conjunction with Guy Carpenter& Company Inc., one of the world's leading reinsurance brokers, and RiskManagement Solutions Inc. ('RMS'), the world's leading provider of catastrophemodelling solutions. Catlin Bermuda would purchase the catastrophe swap from a special purposevehicle, Bay Haven Limited. Bay Haven would in turn issue to investors $200.25million in three year Floating Rate Notes, divided into Class A and Class BNotes. The proceeds of those notes would comprise the collateral for Bay Haven'sobligations to Catlin Bermuda under the catastrophe swap. Standard & Poor's Ratings Services is expected to assign a 'AA' senior secureddebt rating to the Class A Notes and is expected to assign a 'BBB-' seniorsecured debt rating to the Class B notes. This is expected to be the firsttransaction linked to natural peril risk to be rated 'AA' by Standard & Poor's. The catastrophe swap would respond to covered risk events occurring during athree year period. No payment would be made for the first three such riskevents. Bay Haven would pay Catlin Bermuda US$33.375 million per covered riskevent thereafter, up to a maximum of six events. The aggregate limit payable toCatlin Bermuda is $200.25 million. The categories of risk events to be covered by the transaction are: UShurricanes (Florida, Gulf States and East Coast), Californian earthquakes, NewMadrid (US Midwestern) earthquakes, UK windstorms, European (excluding UK)windstorms, Japanese typhoons and Japanese earthquakes. Only one payment would be made for each covered risk event, but the catastropheswap would respond to multiple occurrences of a given category of risk event,such as if more than one qualifying US hurricane occurs during the period. The catastrophe swap would be triggered for US risk events if aggregateinsurance industry losses as estimated by Property Claims Services ('PCS') meetor exceed defined threshold amounts. Coverage for non-US risk events would betriggered if specific parametric criteria, such as wind speeds or groundmotions, are met or exceeded. The stochastic risk analyses, definitions ofcovered events and parametric trigger solutions have been developed by RMS. The first two events paid under the catastrophe swap would impact the Class Bnotes; subsequent events, up to the limit of six events over the three yearperiod, would impact the Class A Notes. Stephen Catlin, chief executive of Catlin Group Limited, said: "The pattern of natural catastrophes over the past several years has focusedattention on how insurers and reinsurers will be able to respond to theincreasing frequency and economic severity of these events. This transaction,when completed, will strengthen Catlin's ability to withstand claims arisingfrom a series of severe natural catastrophes. Along with the steps Catlin hasalready taken to limit its exposure to natural catastrophe risk, the catastropheswap will increase the security that Catlin provides to both policyholders andinvestors." Erik Manning, Insurance & Weather Derivatives Group at ABN AMRO, said: "For the first time, pension funds and other institutional investors will havethe ability to invest in these near zero-beta investments, providing genuineinvestment portfolio diversity with the benefit of high investment graderatings. Bay Haven has opened up the world of Insurance-Linked Securities to awhole new breed of investors." Tibor Winkler, director of risk markets at RMS, in London said: "RMS is very pleased to have participated in the structuring and placement ofthis transaction of natural catastrophe insurance risk into a segment of thecapital markets hitherto virtually untapped by this asset class. As part of ourlong term commitment to this asset class, RMS, the leading provider in thisspace, continues to work with the market for the success of new transactionslike Bay Haven." ENDS For more information contact: Catlin Group LimitedMedia Relations:James Burcke, Tel: +44 (0)20 7458 5710Head of Communications, London Mobile: +44 (0)7958 767 738 E-mail: james.burcke@catlin.com Liz Morley, Maitland Tel: +44 (0)20 7379 5151 E-mail: emorley@maitland.co.uk Investor Relations:William Spurgin,Head of Investor Relations, London Tel: +44 (0)20 7458 5726 Mobile: +44 (0)7710 314 365 E-mail: william.spurgin@catlin.com ABN AMROMedia Relations:Jo Pope Tel: +44 (0) 20 7678 5111 E-mail: joanna.pope@uk.abnamro.com Guy CarpenterMedia Relations:Jennifer Ainslie Tel: +44 (0) 20 7357 2058Head of UK Marketing E-mail: jennifer.ainslie@guycarp.com& Communications Notes to editors: 1. Catlin Group Limited, headquartered in Bermuda, is an international specialist property/casualty insurer and reinsurer writing more than 30 classes of business worldwide. Catlin wrote gross premiums of $1.4 billion in 2005. Catlin shares are traded on the London Stock Exchange (ticker symbol: CGL). More information about Catlin can be found at www.catlin.com. Netherlands-based ABN AMRO is a leading international bank with total assets of EUR 986 billion (as at 30 June 2006). It has more than 3,700 branches in 52 countries, and has a staff of more than 110,000 full-time equivalents worldwide. ABN AMRO is listed on Euronext and the New York Stock Exchange. Guy Carpenter & Company Inc. is the world's leading risk and reinsurance specialist and a part of the Marsh & McLennan Companies, Inc. Securities or investments, as applicable, are offered in the (i) United States through MMC Securities Corp., a US registered broker-dealer and member NASD/SIPC, and (ii) European Union through MMC Securities Ltd., regulated by the Financial Services Authority for the conduct of investment business in the United Kingdom. MMC Securities Corp. and MMC Securities Ltd. are affiliates of Guy Carpenter. Guy Carpenter's website address is www.guycarp.com. Risk Management Solutions, Inc. (RMS) is the world's leading provider of products and services for catastrophe risk management. More than 400 leading insurers, reinsurers, trading companies, and other financial institutions rely on RMS models to quantify, manage, and transfer risk. Founded at Stanford University in 1988, RMS serves clients today from offices in the U.S., Bermuda, the U.K., France, Switzerland, and Japan. For more information, visit our web site at www.rms.com. 2. Catlin operates four underwriting platforms: • The Catlin Syndicate at Lloyd's of London (Syndicate 2003), which is one of the largest syndicates at Lloyd's based on 2006 premium capacity of £450 million. It is a recognised leader of numerous classes of specialty insurance and reinsurance. • Catlin Bermuda (Catlin Insurance Company Ltd.), which underwrites property treaty and casualty treaty reinsurance and property and casualty insurance. • Catlin UK (Catlin Insurance Company (UK) Ltd.), which specialises in underwriting commercial non-life insurance for UK clients. It also writes other classes of business written by the Catlin Syndicate. • Catlin US, which encompasses all of Catlin's operations in the United States. Catlin US includes Catlin Insurance Company Inc., an admitted US insurer which will commence operations soon, along with underwriting offices in Atlanta, New York, Houston, New Orleans and San Francisco. Catlin US has also announced plans to establish a non-admitted insurer in the United States. The Catlin Syndicate, Catlin Bermuda and Catlin UK have financial strength ratings of 'A' (Excellent) from A.M. Best Company. Catlin Bermuda and Catlin UK have insurance financial strength ratings of 'A-' (Strong) from Standard & Poor's; the Catlin Syndicate has a Lloyd's Syndicate Assessment of '4-' (Low Dependency) from Standard & Poor's. 3. Catlin also operates offices worldwide which allow Catlin underwriters to work closely with local policyholders and brokers. The offices are located in Canada (Toronto and Calgary), Australia (Sydney), Singapore, Malaysia (Kuala Lumpur), Hong Kong, Germany (Cologne), Belgium (Antwerp) and Guernsey. Catlin UK has regional offices in Glasgow, Leeds, Derby, Birmingham, Watford and Tonbridge. This information is provided by RNS The company news service from the London Stock Exchange