The world's first humanitarian catastrophe bond covering pure volcanic eruption has been completed using a Guernsey insurance-linked securities (ILS) structure.
The catastrophe bond is a $3 million privately-placed issuance, sponsored by the Danish Red Cross.
It has been brought to market by Replexus and Howden Capital Markets through a Guernsey-domiciled reinsurance structure, Dunant Re IC, which is an incorporated cell of Replexus ICC (Guernsey), which is managed in Guernsey by Aon insurance managers.
The bonds were settled using Replexus’ unique blockchain-based ILS platform, the ILSBlockchain.
The catastrophe bond covers the risk of eruption of 10 volcanoes across three continents and raised $3 million from specialist cat bond investors, with the capital set to be used to support humanitarian aid in the aftermath of an eruption.
Initial investors in the volcano cat bond included ILS specialist managers Plenum Investments, Schroder Investment Management and Solidum Partners.
Rupert Pleasant, Guernsey Finance chief executive, says: “We have been watching the development of this with great interest. What a great result for the Danish Red Cross, Replexus and for Guernsey — this is a world first and truly unique example of sustainable finance in the humanitarian market.”
Paul Sykes, managing director at Aon, notes: “We are excited to have been involved in another first for the ILS market supporting Replexus on the establishment and management of Dunant Re IC.”
He adds: “The transaction demonstrates Guernsey’s credentials in the ILS and sustainable finance space which we expect to grow significantly in the future.”
In April 2019, Guernsey introduced the world’s first ILS hybrid vehicle.
The hybrid, which is a protected or incorporated cell company that is both a licensed insurance company and a regulated investment fund, meaning ILS managers will no longer have to rent cells of protected cell or segregated account companies to act as Special Purpose Insurers (SPIs).
