The first is on the way green catastrophe bond for Generali. The insurance company has entered into a multi-year reinsurance contract backed by highly creditworthy assets with the Irish company Lion III King DAC. The latter will cover any catastrophic losses suffered by the Group following storms in Europe and earthquakes in Italy for the next 4 years. This is the first catastrophe bond that integrates sustainable features in line with the Green ILS Framework.
In turn, Lion III Re DAC issued a single tranche of debt securities for a value of 200 million euro to finance the commitments undertaken under the contract. In particular, the securities were placed through an issue compliant with US 144A regulations with investors operating on the capital market.
On the other hand, the request from investors has allowed the Group to guarantee protection with a annual premium of 3,50% out of 200 million euros of reinsurance contract coverage, which Lion III Re DAC will in turn pay to investors as part of the interest paid on the securities. All or part of the amount of interest and principal relating to the bonds, according to the terms of the offer, will be reduced upon the occurrence of losses (if any) for Generali due to earthquakes in Italy or storms and floods in Europe, in excess of the damage thresholds envisaged for each type of risk.
The operation – reads a note – further highlights the Group's commitment to promoting solutions green finance: the risk capital freed up thanks to this operation will be directed to green projects; the collateral will be invested in highly rated green bonds issued by the "European Bank for Reconstruction and Development" (EBRD); reporting will be provided relating to the allocation of risk capital released in projects deemed suitable and the EBRD's reporting regarding its portfolio of green projects. Furthermore, the major service providers involved are already committed to integrating the sustainability in their business strategies.
“Generali has demonstrated once again that it deserves the trust of both investors and traditional reinsurers, by managing to understand their needs,” he said. Sandro Panizza, Group Chief Insurance & Investment Officer -. This new issue allows the Group to further optimize the acquisition of reinsurance covers, leveraging, thanks to the quality of its portfolio, the trust of the traditional reinsurance market and the ILS market. Investor interest in the securities issued by Lion III Re DAC has allowed Generali to obtain a better balance on the risk return for the entire reinsurance programme”.
“The success achieved with the issuance of the third catastrophe bond confirms Generali's excellent positioning in the ILS market – stated Christian Borean, Group CFO of Generali -. This transaction further demonstrates the Group's innovative approach in implementing its capital management strategy, managing to integrate sustainability principles with alternative risk transfer solutions. The Group's adherence to the Green ILS Framework also confirms our commitment to sustainability through the continuous support of green projects and the involvement of all our stakeholders to achieve this goal”.
