Massachusetts Insurer Sells $96 Million Cat Bond for Hurricane Protection
Massachusetts’s property insurer of last resort sold $96 million of catastrophe bonds to protect against hurricane damage in a deal managed by Munich Re.
The three-year securities, issued on behalf of the Massachusetts Property Insurance Underwriting Association, will pay 7 percentage points more than three-month Treasury bills, Munich Re said today in a statement.
Massachusetts ranks fourth in the U.S. in the value of insured coastal property, behind Florida, New York and Texas, according to 2007 data from catastrophe-modeling firm AIR Worldwide. The buyers of the securities, including European institutional investors, could forfeit their principal to the insurer if a severe enough hurricane strikes.
“Capital markets constitute a good complementary risk carrier for specialized peak risks like Massachusetts hurricane,” said Tony Kuczinski, president and chief executive officer for the U.S. division of Munich Re, the world’s largest reinsurer.
The Massachusetts insurance association was created by the state to provide coverage for property owners who couldn’t buy policies in the private market.
To contact the reporter on this story: Inyoung Hwang in New York at Ihwang7@bloomberg.net
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