By Swiss Re Capital Markets

NEW YORK, May 20, 2013 — NEW YORK, May 20, 2013 /PRNewswire/ — Swiss Re Capital Markets has successfully advised on a USD 300 million cat bond issuance by Long Point Re III Ltd., covering Northeast US Hurricane on behalf of Travelers

Long Point Re III Ltd. is a Cayman Islands special purpose insurer which was previously established by Travelers in 2012. The Long Point Re 2013-1 notes provide Travelers with three years of protection for hurricane losses in the Northeast United States and is the second cat bond issued from Long Point Re III Ltd.

“We are delighted to continue our support for the Travelers’ Long Point Re III catastrophe bond program. The transaction demonstrates Swiss Re’s strong commitment to serve our clients in transferring natural catastrophe risks to the capital markets and underlines our strong market position in developing innovative and efficient catastrophe bond products”, said Markus Schmutz, Head of Structuring and Origination at Swiss Re Capital Markets.

Swiss Re was the lead structurer and a joint bookrunner for the offering.

Standard & Poor’s has published a BB (sf) rating for the Long Point Re III notes.

The Long Point Re III notes were sold pursuant to Rule 144A of the U.S. Securities Act of 1933, as amended, (the “Securities Act”) and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject, to the registration requirements of the Securities Act and applicable state securities laws.

Swiss Re Capital Markets

In the U.S., securities products and services are offered through Swiss Re Capital Markets Corporation, a registered broker dealer and a member of FINRA and SIPC. Swiss Re Capital Markets Limited is authorized and regulated in the U.K. by the Financial Conduct Authority. Both Swiss Re Capital Markets Corporation and Swiss Re Capital Markets Limited, together Swiss Re Capital Markets, are wholly owned subsidiaries of Swiss Re Ltd.

Swiss Re

The Swiss Re Group is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. Dealing direct and working through brokers, its global client base consists of insurance companies, mid-to-large-sized corporations and public sector clients. From standard products to tailor-made coverage across all lines of business, Swiss Re deploys its capital strength, expertise and innovation power to enable the risk-taking upon which enterprise and progress in society depend. Founded in Zurich, Switzerland, in 1863, Swiss Re serves clients through a network of over 60 offices globally and is rated “AA-” by Standard & Poor’s, “A1” by Moody’s and “A+” by A.M. Best. Registered shares in the Swiss Re Group holding company, Swiss Re Ltd, are listed on the SIX Swiss Exchange and trade under the symbol SREN. For more information about Swiss Re Group, please visit: www.swissre.com or follow us on Twitter @SwissRe.

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further instability affecting the global financial system and developments related thereto, including as a result of concerns over, or adverse developments relating to, sovereign debt of euro area countries;

further deterioration in global economic conditions;

Swiss Re’s ability to maintain sufficient liquidity and access to capital markets, including sufficient liquidity to cover potential recapture of reinsurance agreements, early calls of debt or debt-like arrangements and collateral calls due to actual or perceived deterioration of Swiss Re’s financial strength or otherwise;

the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, credit spreads, currency values and other market indices, on Swiss Re’s investment assets;

changes in Swiss Re’s investment result as a result of changes in its investment policy or the changed composition of its investment assets, and the impact of the timing of any such changes relative to changes in market conditions;

uncertainties in valuing credit default swaps and other credit-related instruments;

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the possibility that Swiss Re’s hedging arrangements may not be effective;

the lowering or loss of one of the financial strength or other ratings of one or more Swiss Re companies, and developments adversely affecting Swiss Re’s ability to achieve improved ratings;

the cyclicality of the reinsurance industry;

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uncertainties in estimating future claims for purposes of financial reporting, particularly with respect to large natural catastrophes, as significant uncertainties may be involved in estimating losses from such events and preliminary estimates may be subject to change as new information becomes available;

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acts of terrorism and acts of war;

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significant investments, acquisitions or dispositions, and any delays, unexpected costs or other issues experienced in connection with any such transactions;

changing levels of competition; and

operational factors, including the efficacy of risk management and other internal procedures in managing the foregoing risks.

These factors are not exhaustive. Swiss Re operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. Swiss Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

This communication is not intended to be a recommendation to buy, sell or hold securities and does not constitute an offer for the sale of, or the solicitation of an offer to buy, securities in any jurisdiction, including the United States.  Any such offer will only be made by means of a prospectus or offering memorandum, and in compliance with applicable securities laws.

Related story

Travelers achieves greater flexibility with Long Point Re III 2013-1 catastrophe bond

by Artemis

U.S. primary insurer The Travelers Companies, Inc. has successfully sponsored its fourth catastrophe bond transaction with the recently completed Long Point Re III Ltd. (Series 2013-1) transaction. The second issuance under its Long Point Re III Cayman Islands domiciled SPV, this deal secures Travelers a $300m three-year source of fully-collateralized reinsurance protection against hurricanes in northeastern U.S. states on an indemnity and per-occurrence basis.

Long Point Re III 2013 continues Travelers focus on northeast and Atlantic state hurricane coverage, effectively providing another layer of capital markets backed reinsurance cover for this peril from Virginia to Maine. This deal is the insurers second indemnity cat bond, with its first two deals having been industry loss triggered.

The 2013 deal is more risky than its transaction from last year, attaching at an indemnity level of $1.25 billion and having an exhaustion point of $1.8 billion, so covering a 54.55% of a layer beneath the Long Point Re III Ltd. (Series 2012-1) which attaches at $2 billion of losses.

The covered book of business which has been ceded in the transaction is a subset, and a majority, of Travelers’ portfolio from its personal and commercial-lines business. According to rating agency Standard & Poor’s the commercial-lines business is a mix of Travelers’ select accounts (small business policies) and commercial accounts (midsize business policies). Certain business units that cover large and unique exposures, complex financial structures, and mobile property have been excluded from the transaction.

Showing the appetite that investors have for catastrophe bond notes, Long Point Re III 2013-1 doubled in size from the initial volume of $150m that it was marketed at to $300m of notes by the time it completed. The pricing also dropped, it had launched with a coupon price range of 4% to 4.75% and eventually priced at the bottom end of that range at 4%.

GC Securities, who acted as joint bookrunner on this transaction, noted that the deal enhanced the protection that Travelers receives from the capital markets through the addition of a number of new features which provide flexibility to the sponsor. This includes an expanded definition of hurricanes, this has been worded to include and storm reported by any agency at any time to be a hurricane and also includes storms which may merge with other systems. This new definition would ensure that the cat bond covered a storm such as hurricane Sandy.

Other enhancements include the ability to adjust the layer of coverage using a variable reset feature which allows the sponsor, Travelers, to adjust the trigger amount as long as the expected loss remains between 1% and 1.5%. The deal also features a call option allowing Travelers to redeem the cat bond, for a small above par penalty. This would allow the insurer to swap the cover back to traditional reinsurance sources if the pricing was attractive enough to offset the penalty.

Cory Anger, Global Head of ILS Structuring at GC Securities, commented; “In addition to the favorable pricing and capacity environment for cat bond sponsors, Long Point Re III demonstrates the continued innovation of the ILS sector to improve and balance structural terms. The Series 2013-1 Notes demonstrate state-of-the-art structural features that allow Travelers to best manage its protection needs with respect to northeast United States hurricanes and available forms of protection.”

The Long Point Re III 2013-1 cat bond issuance allowed Travelers to optimise its capital markets protection, with multi-year coverage and these new features, and acquire protection much further down its reinsurance tower for a much better price. It’s 2012-1 issuance priced at 6% with a much higher attachment point than this deal which has priced at 4%.

This further demonstrates the appetite and willingness of capital markets investors to provide sources of reinsurance cover at very reasonable pricing.

Chi Hum, Global Head of ILS Distribution at GC Securities, said; “High levels of investor cash inflows led to broad investor support for a repeat issuer resulting in strong execution of the Longpoint Re III – Series 2013-1 Notes issued for the benefit of Travelers. With this Series 2013-1 issuance, Travelers continues to refine their cat bond structures to optimize and integrate its impact relative to their entire reinsurance purchase program.”

David Priebe, Vice Chairman of Guy Carpenter and Head of GC Securities, added; “Long Point Re III is the latest example of the accelerated convergence in 2013 between the capital markets and (re)insurance sectors. GC Securities is proud to have assisted Travelers in accessing capital markets capacity through the offering of the Series 2013-1 Notes.”

Swiss Re acted as lead structurer and the other joint bookrunner for the offering. Markus Schmutz, Head of Structuring and Origination at Swiss Re Capital Markets, commented; “We are delighted to continue our support for the Travelers’ Long Point Re III catastrophe bond program. The transaction demonstrates Swiss Re’s strong commitment to serve our clients in transferring natural catastrophe risks to the capital markets and underlines our strong market position in developing innovative and efficient catastrophe bond products.”

Rating agency Standard & Poor’s assigned its ‘BB(sf)’ rating to the Series 2013-1 Class A catastrophe bond notes issued by Long Point Re III Ltd.

The $300m of Series 2013-1 Class A principal-at-risk variable rate notes issued by Long Point Re III Ltd. have been admitted for listing on the Cayman Islands Stock Exchange.

You can read more details on this Long Point Re III Ltd. (Series 2013-1)  transaction in our catastrophe bond Deal Directory at: http://www.artemis.bm/deal_directory/

For more on this story go to:

http://www.artemis.bm/blog/2013/05/20/travelers-achieves-greater-flexibility-with-long-point-re-iii-2013-1-catastrophe-bond/