Catlin Adds Reinsurance Contract

Catlin Group Limited, the international specialty property/casualty insurer and reinsurer, has purchased a collateralised US$150 million annual aggregate reinsurance contract which protects the Group’s portfolio of property treaty reinsurance against accumulated losses from specific perils. The transaction is unusual as it provides retrocessional ‘catastrophe bond’ type coverage for a diverse portfolio of property catastrophe exposures on an indemnity basis. As it would be triggered by Catlin’s actual losses, it reduces the basis risk present in most index-based or parametric-based catastrophe bond products. The coverage, which expires on Dec. 31, 2010, will be triggered if Catlin’s losses from defined US windstorms and earthquakes, European windstorms, and Japanese windstorms and earthquakes exceed an annual aggregate threshold amount. The coverage complements the collateralised catastrophe protections previously purchased by Catlin in 2006 and 2007 and its traditional reinsurance programme. In the transaction, which was completed on Feb. 21, Catlin has entered into a reinsurance agreement with Newton Re Limited, a special purpose reinsurer established in the Cayman Islands. Newton Re in turn has issued US$150 million of principal at-risk variable rate notes, the proceeds of which will be used to provide collateral for Newton Re’s obligations to Catlin under the reinsurance agreement.