An Australian insurance giant has diversified its suite of available reinsurance solutions with the purchase of its first catastrophe bond.
Insurance Australia Group (IAG) has taken out a $75 million Singaporean cat bond to protect itself against natural peril risks in Australia and New Zealand and appointed BNY Mellon as its indenture trustee, reinsurance trustee, paying agent, account bank, Singapore security trustee, and trust accountant.
IAG’s first cat bond, which is also the first deal under Singapore’s new insurance linked securities (ILS) laws, forms part of the insurer’s aggregate sideways cover, which in total provides protection of $475 million excess of $375 million.
“We were well positioned to support IAG’s cat bond given BNY Mellon’s reach,” said Kenneth Cheong, Asia Pacific managing director of corporate trust at BNY Mellon. “This deal saw our experts working with various parties on the global transaction, with teams involved from New York, Sydney, and Singapore. IAG has had a reinsurance presence in Singapore for more than a decade. With BNY Mellon’s technical and servicing support, this cat bond issuance is a significant milestone in the development of Singapore’s insurance-linked securities market. IAG’s deal will be one for the books as the first deal to take advantage of Singapore’s brand new ILS laws.”
Singapore’s new ILS grant scheme, developed in consultation with industry experts including GC Securities and IAG and launched in February 2018, funds upfront ILS bond issuance costs.