Coastal Insurer UPC’s First Catastrophe Bond Provides It with $100M Cover

Swiss Re Capital Markets said it has structured and placed $100 million of insurance-linked securities (ILS) that cover named storms and earthquakes affecting certain coastal states of the U.S.

The bonds have been issued by Laetere Re Ltd. on behalf of United Property & Casualty Insurance Co. (UPC) and its subsidiaries, Family Security Insurance Co. (Hawaii) and Interboro Insurance Co. (New York). The transaction is UPC’s first catastrophe bond.

UPC writes home insurance policies in coastal states from Florida to Massachusetts as well as in Texas and Louisiana. UPC describes its target market as areas “where the perceived threat of natural catastrophe has caused large national insurance carriers to reduce their concentration of policies.”

UPC acquired Family Security, which operates in Hawaii and Louisiana, in 2015 and it acquired Interboro in 2016.

Swiss Re Capital Markets said it underwrote the transaction via three classes of principal at-risk variable rate notes issued by Bermuda-based Laetere Re. Each of the $30 million Class A notes, the $40 million Class B notes and the $30 million Class C notes has a one-year risk period starting June 1, 2016 and was structured as a discount note. The respective reinsurance agreements provide UPC with cascading per occurrence indemnity protection against named storms and earthquakes affecting certain states of the U.S., according to Swiss Re.

“We hope that this transaction is the first of many catastrophe bonds for UPC as it seeks to build a long-term relationship with ILS investors and expand its reinsurance panel via this diversifying source of capital,” said Jean-Louis Monnier, co-head of ILS at Swiss Re Capital Markets.

Swiss Re Capital Markets is the registered broker dealer subsidiary of re/insurer Swiss Re Ltd.