RMS models for transfer of $180 million of excess mortality risk to the capital markets
Newark, Calif. -
October 03, 2013 -
RMS, the world's leading catastrophe modeling firm, today announced that the company conducted the risk analysis for a catastrophe bond recently issued through
Atlas IX Capital Ltd. The bond, Atlas IX Capital Limited (Series 2013-1), sponsored by SCOR, transfers $180 million of U.S. excess mortality risk to the capital markets and proxies exposure to high levels of mortality over a six-year period, reducing basis risk and providing SCOR effective protection. This deal has been rated by S&P and is the first public issuance of an excess mortality bond by a sponsor other than Swiss Re.
RMS used its suite of sophisticated LifeRisks models to conduct the analysis, providing robust risk quantification for factors such as longevity, infectious disease, U.S. earthquake casualty, probabilistic terrorism and residual risk.
"The RMS state-of-the-art LifeRisks models are proven and allow investors to gain intuition about the risk," said Peter Nakada, managing director, capital markets at RMS. "Our event-based model for infectious disease allows investors to see the scenarios that could cause the bond to trigger."
The bond allows SCOR to diversify its capital protection tools, providing a multi-year cover at a fixed premium. SCOR selected RMS as the risk modeling firm best positioned to help them achieve this because of reliable modeling and previous work with excess mortality.
The bond priced at the low end of guidance and upsized from $125m to $180m. The paid coupon, at 3.5% above a floating rate, provides cover against an annualized attachment probability of 1.16%.
The deal was originally launched with two tranches, but high demand allowed SCOR to place all $180m into the riskier Class B notes. Class B notes are triggered by the lowest index value, of this index type, of any current public offering.
"The Series 2013-1 note offering of Atlas IX has created tremendous interest, enabling SCOR Global Life to secure substantial protection against its increased pandemic exposure following the strong growth of its portfolio, with the acquisition of Generali U.S. being the latest example," said Gilles Meyer, chief executive officer of SCOR Global Life. "In combination with the innovation of an exceptionally low attachment point, the secured protection represents a very cost efficient risk mitigation tool."
RMS models and software help financial institutions and public agencies evaluate and manage catastrophe risks throughout the world, promoting resilient societies and a sustainable global economy.