Converium Announces $100 Million Cat Bond Placement

Converium Ltd., the Swiss-based reinsurer, announced the successful private placement of $ 100 million of floating rate notes issued by Helix 04 Limited, a Bermuda special purpose exempted company. The notes have been priced at LIBOR* plus 5.40 percent with a maturity of 5 years. S&P has rated them “BB+.”

The announcment noted that “by means of a counter party contract with the issuer, the transaction provides Converium with fully collateralized second and subsequent event protection for North Atlantic hurricane, US earthquake, Japanese earthquake and European windstorm property catastrophe exposures. The notes are triggered only by second and subsequent events in any of the four peril regions during the five-year term of the transaction.”

The company said that “following the success of the expiring Trinom transaction,” it had made a “strategic decision to access the capital markets in order to secure capacity in advance of a major catastrophe event.”

The announcement explained that the “Helix transaction’s scope is broader than Trinom’s. Coverage is based on modeled losses to a notional portfolio. The notional portfolio was structured by Converium to reflect its European windstorm, US earthquake, Japanese earthquake and North Atlantic hurricane exposures.”

Converium also said that it “expects to benefit from predefined attractive fixed pricing.”

Converium structured the transaction and marketed it in cooperation with Aon Capital Markets, who also underwrote the issue as sole manager and book-runner. Risk modeling and analytical services were provided by AIR Worldwide Corporation using its hurricane, earthquake and windstorm models (see related article, June 15).

“This transaction once again proves Converium’s ability to access the capital markets as an alternative to traditional retro markets,” commented Converium’s CEO Dirk Lohmann. “In sponsoring Helix 04,Converium offered investors the opportunity to share in a well-defined structure which they can use to diversify their portfolios. We have also secured our shareholders’ interest by reducing our exposure to price increases and credit risk following a major industry event. In addition, we were able to benefit from favorable conditions currently prevailing in the capital markets.”

*London Interbank Offered Rate