California Earthquake Authority

California Earthquake Authority Sold $ 150 Million Catastrophe Bond :

Sacramento, California Earthquake Authority, California, said he sold the first earthquake catastrophe bonds issued only without the use of reinsurance companies and intend to return to the market every four to six months, as investors show interest. The CEA, publicly managed organization, but who writes the privately financed 70% of all residential earthquake policies sold in California, said he had made a reinsurance contract with Embarcadero Reinsurance Ltd. in Bermuda-based special vehicle equipment reinsurance, which was founded as the CEA mode, then sold $ 150 million three-year disaster for investors.

The money, the CEA said that "this is the first catastrophe of the earthquake are only issued debt without the participation of traditional reinsurers," was placed in an account that CEA can be extracted from their actual losses covered by the contract reinsurance. "This agreement is a game changer," CEO Glenn Pomeroy CEA said in a statement. While traditional reinsurance is still valid, "the CEA must diversify and expand its claims paying resources."
California Earthquake Authority
Less expensive than reinsurance
"This agreement establishes a multi-year plan, a reproducible method of risk transfer that are less expensive than traditional reinsurance," Tim Richison, CEA chief financial officer, said in a statement.
Investor demand for catastrophe bonds has far exceeded $ 150 million issue, the CEA said about the deal led by Deutsche Bank Securities.
The CEA also said that he worked on rate changes and shape that will reduce the premium for earthquake statewide average of 12% while providing additional coverage options.
The CEA was created after the California legislature in 1996, most insurance companies stopped writing earthquake coverage after the 1994 Northridge earthquake.
Reinsurance provides $ 3.1 billion to $ 9.4 billion CEA claims paying ability, he said in the statement.
Approximately $ 2 billion in the ability left the catastrophe bond market so far this year with only four against the second quarter, but the activity bond cat seems to pick up the rest of the year 2011, a unit of Willis Group Holdings PLC said in July. In the last week in Munich Reinsurance Co. reached $ 150 million in catastrophe bond market protection from storms in Europe, the first non-American cat bond issued since Hurricane exposed in October 2010.


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