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Groupama closes Green Valley transaction

French mutual Groupama SA has completed its first insurance linked securities (ILS) transaction with its EUR200mn securitisation of French windstorm risk.

Groupama, which closed the deal through ILS pioneer Swiss Re, joins other European issuers in launching Euro denominated cat bonds this year.

The notes were issued via special purpose insurance vehicle Green Valley Ltd under a EUR800mn shelf programme and provide cover for the group’s French windstorm portfolio until January 2011.

Ratings agency Standard & Poor’s (S&P) rated the notes BB+. Groupama’s bond is believed to be priced at EURIBOR plus 370-400 basis points, and has a parametric trigger based on models developed by Risk Management Solutions (RMS).

“Catastrophe bonds of this type are well-established risk management tools for insurance and reinsurance companies to transfer peak risks in certain parts of the world into the capital markets,” said S&P credit analyst Cameron Heath.

The bond is the fifth Euro denominated bond ever to be brought to market. Last month, SCOR closed its EUR160mn Atlas IV transaction, following Allianz’s Blue Fin transaction earlier in November, which included EUR155mn of notes, AXA's motor bond FCC Sparc in June and SCOR’s EUR120mn Atlas III in 2006.

This year has also seen insurers including State Farm, Allstate and AXA package direct insurance risk into cat bonds.

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