8 April 2015 Insurance

MPIUA launches Cranberry Re cat bond

The Massachusetts Property Insurance Underwriting Association (MPIUA) has launched a three-year catastrophe bond via Hannover Re.

Cranberry Re – a Bermudian special purpose insurer (SPI) belonging to Hannover Re, will cover insured property losses caused by named storms, severe thunderstorms and winter storms in the state of Massachusetts on an annual aggregate basis using an indemnity trigger. It has a reported size of $200 million.

The bond on behalf of the MPIUA, which provides basic property insurance on eligible property for applicants who have been unable to gain insurance through the voluntary market, is expected to mature on July 6, 2018.

Initially, noteholders are subject to principal loss (and reduced interest) if the annual aggregate ultimate net losses exceed the attachment point of $300 million and a total loss of principal occurs if the severity reaches $1.4 billion in the first twelve-month risk period.

According to Fitch Ratings, which expects to rate the bonds at Bsf'; Outlook Stable, there will be three annual risk periods over the term of the notes, with the 'reset' occurring on July 1, 2016 and July 1, 2017 using AIR's escrowed software models and MPIUA's updated subject business data and loss adjustment expense factor. At each reset date, MPIUA may exercise an option to decrease (or increase) the attachment levels within a rather wide exceedance probability range of 4.00 percent to 1.50 percent.

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