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Blue Coast $120mn cat bond set to close

Allianz is poised to close a $120mn US catastrophe bond under an innovative new structure that is designed to minimise basis risk by drilling down to cover (re)insurers’ actual loss exposures in greater detail.

Our sister publication Trading Risk revealed that Blue Coast Ltd – a Cayman Islands-based special purpose vehicle – is set to close imminently with an official announcement likely this week.

Structured by Guy Carpenter and Deutsche Bank, Blue Coast provides Allianz Risk Transfer (Bermuda) Ltd with $120mn of securitised capacity protecting the insurer from one or more hurricanes in Florida and other coastal US states until 1 December 2010.

Blue Coast is the first transaction under Deutche Bank’s LAZR structure which aims to open up the insurance linked securities market to more cedants by ensuring their loss exposures are better represented by non-indemnity loss triggers.

“The structure aims to limit basis risk, by breaking down the individual portfolio of an individual insurance company, and tailoring a transaction to suit them,” one source close to the deal told Trading Risk at the beginning of the month.

“The interesting thing is that once you get the first one done, you can copy it again and again, even for very small bonds, like $50mn,” he added.

Deutsche has partnered with modelling firm AIR Worldwide for the first bond under the structure which will model final industry losses after a catastrophe event to county level.

Modelling losses to this detail will provide more granular loss data than is currently provided by Property Claims Services (PCS), which calculates losses at a state level only.

Blue Coast is structured in three tranches of Class A, B and C notes with low and high trigger thresholds for each county.

Deutsche and Guy Carpenter are acting as managers/bookrunners on the deal.

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