Assicurazioni Generali has stipulated a contract with Horse Capital I, an Irish designated activity company, to cover the loss ratio on the MV liability portfolio of 12 of its companies present in the seven European countries where Generali has a significant market share in the MV segment (Italy, Germany, France, Austria, the Czech Republic, Spain and Switzerland).
Generali has successfully implemented this Group-wide protection against unexpected changes in the loss ratio of the Motor TPL, transferring part of the related risk to the bond investors. Horse Capital I has issued three tranches of debt securities, each for an amount of €85 million and with different risk profiles, for a total amount of €255 million. The securities were placed with investors operating on the capital market, through an issue compliant with American regulation 144A.
This transaction is the first placement ever made on the capital market under this legislation which offers protection in the motor liability market. The General Manager and Group CFO of Generali, Alberto Minali, commented: “The transaction we have prepared further demonstrates the Group's advanced approach to capital management and the structuring of adequate risk transfer mechanisms. The great success of this initiative, just a few weeks after the Investor Day in London, is further and clear confirmation of the fact that the capital market once again appreciates the actions that the Group is taking to optimize the allocation of capital in line with its strategy”.
Horse Capital I is an innovative operation which provides Generali with fully collateralized coverage for a period of three years. It also allows Generali to optimally manage any volatility of the loss ratio and solvency ratio and, at the same time, allows its companies to continue to subscribe with the usual discipline and operate in the management
claims in line with its best practice.
The success achieved on the capital market made it possible to increase the protection provided to Generali by more than 40% compared to the initial €180 million. Generali will annually pay a different premium depending on the tranche subscribed - 4% for Class A, 6,25% for Class B and 12% for Class C - on the amount of coverage respectively provided in correspondence with each tranche .
