(Reuters) – A private catastrophe bond has been listed on the Channel Islands Stock Exchange, the first time such a deal has been made fully tradable in the secondary market.
The California Earthquake Authority (CEA) and reinsurance firm Solidum Partners set up a special purpose vehicle (SPV) in Guernsey to issue cat bond notes through a transformer reinsurance contract.
The SPV – called Solidum Re Eiger IC Limited – provides $52 million of earthquake protection for the CEA in the state via a privately placed catastrophe bond.
Catastrophe bonds are used by the insurance industry to transfer extreme risks, such as those for earthquakes or hurricanes, to capital market investors. They receive a handsome yield in return for agreeing to cover damages they consider unlikely.
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