Swiss Re Capital Markets structures and places the first parametric earthquake catastrophe bond to hedge mortgage risk caused by earthquakes for Bayview

This transaction is the first catastrophe bond issued under Rule 144A with a parametric trigger that is designed to cover mortgage default risk caused by earthquakes in California, Oregon, Washington and South Carolina. Swiss Re Capital Markets acted as the sole structuring agent and joint-bookrunner.

The pioneering transaction had two classes of principal at-risk variable rate notes issued by Sierra Ltd., a special purpose vehicle incorporated in Bermuda (the "Issuer"). As part of the transaction structure, Bayview has entered into a derivative agreement with Sierra Ltd, which provides protection on a parametric per occurrence basis against earthquakes. The notes have a three-year risk period and provide protection using the data provided by the U.S. Geological Survey.

Jean-Louis Monnier, Head of Retro & ILS Structuring of Swiss Re’s Alternative Capital Partners says: “We’re proud to have worked with Bayview in structuring and placing the first parametric catastrophe bond designed to protect against mortgage default caused by earthquakes. Parametric solutions help speed up the claims process, while offering greater transparency to investors. This landmark transaction underscores the potential of the capital markets in helping to reduce the hedging gap and build resilience against uninsured risks prevalent in the U.S. mortgage markets.”

The Sierra Ltd. notes were sold pursuant to Rule 144A of the U.S. Securities Act of 1933, as amended (the “Securities Act”) and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to the registration requirements of the Securities Act and applicable state securities laws.