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Insurance Australia Group Ltd. has secured 75 million Australian dollars ($53.5 million) of annual aggregate catastrophe protection for three years with its Orchard ILS Pte. Ltd. catastrophe bond, GC Securities, a division of MMC Securities LLC, said in a statement Wednesday.
The bond is part of IAG’s 2019 catastrophe aggregate reinsurance cover and represents the first such transaction by the company, said GC securities, sole structuring agent and sole placement agent for the catastrophe bond.
Orchard ILS Pte Ltd. “adds a new element to the company’s risk transfer program and diversifies its suite of available reinsurance solutions,” the statement said.
The bond is an AU$75 million Series 2019-1 Class A Principal At-Risk Variable Rate Notes due Jan. 17, 2022, according to a statement from law firm Rajah & Tann Singapore LLP, which acted as Singapore counsel to the transaction, the statement said.
In February 2018, the Monetary Authority of Singapore introduced its insurance-linked securities grant scheme, which funds upfront ILS bond issuance costs, the statement said.
“The IAG cat bond issuance is a significant milestone in the development of Singapore’s ILS market,” Ng Yao Loong, MAS assistant managing director, development and international group, said in the statement.
“Singapore’s ILS grant scheme is an excellent initiative that has played an important part in enabling this transaction to take place,” David Priebe, vice chairman at Guy Carpenter & Co. LLC, said in the statement.
“The fact that we completed this inaugural ILS transaction within a few weeks demonstrates the efficiency and business-friendly regulatory environment in Singapore,” Simon Goh, head of the insurance and reinsurance practice at Rajah & Tann, said in the firm’s statement. “Following this successful transaction, we are optimistic that more issuers will consider coming to Singapore.”
U.S.-based reinsurance broker Guy Carpenter and Co. L.L.C. said that the amount of catastrophe bond limit covering Asia-Pacific risk grew 24% year over year to nearly $3.5 billion in the first nine months of 2018, Artemis.bm reports. The reinsurance broker said that most of the cat bond risk is solely exposed to Japan. Insurance-linked securities and cat bond limits are likely to expand in the disaster-prone region and provide global diversification opportunities for the ILS market, Guy Carpenter added.