LONDON (Reuters) – Allstate, the largest publicly traded U.S home and auto insurer, has returned to the catastrophe bond market with a $250 million offering, five years after investors lost millions of dollars on a previous issue due to the collapse of Lehman Brothers.
The 2007 Willow Re bond – also for $250 million – was one of four so-called “cat bonds” that used Lehman Brothers as a swap counterparty, which meant it acted as a guarantor for the collateral backing the deal.
When Lehman failed in 2008, the notes became invalid and investors did not get their original investment back.
Insurers have used catastrophe bonds since the 1990s to manage their exposure to natural disasters by transferring potential losses to investment funds. Investors receive a high rate of interest on the bonds, but risk losing part or all of their capital if a natural disaster occurs.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
- Educational webcasts, resources from industry leaders, and informative newsletters.
- Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
