Swiss Re Signs $1.5 Billion Letter of Credit with JP Morgan

Swiss Re has reacted to what it describes as “the unprecedented turmoil in the capital markets,” by arranging a $1.5 billion Letter of Credit (LoC) facility with JP Morgan.

The world’s largest reinsurer has suffered some heavy losses in the current financial meltdown and has seen significant erosion of its capital position (See related article on A.M. Best’s rating actions).

Swiss Re said it had arranged the LoC, as “significant opportunities are emerging for well-capitalized insurance and reinsurance companies. Swiss Re is in a strong position to respond to increasing demands from our clients for reinsurance solutions, both in Property and Casualty, and Life and Health.”

Swiss Re said the long term letter of credit facility with JP Morgan “demonstrates its access to long term financing at competitive rates. Maturing in 2028, the LoC facility has a life of 20 years, with a price reset feature after the first 10 years. This facility replaces and expands the existing arrangements Swiss Re currently has in place in order to meet US regulatory requirements for its life business.”

CEO Jacques Aigrain commented: “Notwithstanding the difficult capital market environment, we have concluded an attractive, long term arrangement with JP Morgan which will further enhance our position to be able to benefit from opportunities that arise from the current market environment. Clients turn to us as they look for a very strong counterparty in terms of superior capital and liquidity – and we are responding accordingly.”

Source: Swiss Re – www.swissre.com