Insurance broker Benfield, based in London, and New York-based investment firm Merrill Lynch said they have formed a partnership to offer insurers and reinsurers catastrophe bonds.
Catastrophe bonds are an alternative means of raising capital for reinsurers through the investment market. As defined by the terms of the bond, investors get their assets back, plus interest, depending on how much, if any, of the bond is triggered.
Rob Bredahl, chief executive of Benfield Advisory, said in an interview that this one-year collaboration is aimed at bringing the unique expertise of a reinsurance broker and an investment banking firm together.
Benfield, he said, has the analytic tools and knowledge of insurance clients, while Merrill knows the investors.
"It's an ideal mix of skills," he said.
While insurers and investment banking firms have sold catastrophe bonds individually in the past, Mr. Bredahl said the focus has been geared to a very narrow market. Under this arrangement, both Benfield and Merrill hope to sell bonds to a wider portfolio of investors.
Length of the bond depends upon terms worked out in advance of the sale.
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