BNY Mellon appointed trustee for A$75 million catastrophe bond

IAG’s catastrophe bond is the first covering Australian/New Zealand all natural perils and the first deal under Singapore’s new insurance linked securities laws

BNY Mellon has been appointed indenture trustee, reinsurance trustee, paying agent, account bank, Singapore security trustee, and trust accountant for an A$75 million (US$52.15 million) Singaporean Catastrophe (Cat) Bond transaction by Insurance Australia Group (IAG).

Cat Bonds are risk-linked securities designed to protect insurers against the risks of potential catastrophe events, with IAG’s deal being the first to offer protection against all natural peril risks in Australia and New Zealand.

This is IAG’s first Cat Bond, issued through Orchard ILS Pte Ltd., a Singapore-registered special purpose vehicle (SPV). The transaction provides IAG A$75 million of protection, forming part of its aggregate sideways cover, which in total provides protection of A$475 million excess of A$375 million. Orchard ILS Pte Ltd. adds a new element to IAG’s risk transfer program and diversifies its suite of available reinsurance solutions.

“We were well positioned to support IAG’s Cat Bond given BNY Mellon’s reach,” says Kenneth Cheong, managing director of Corporate Trust, Asia Pacific, BNY Mellon. “This deal saw our experts working with various parties on the global transaction, with teams involved from New York, Sydney, and Singapore.”

“IAG has had a reinsurance presence in Singapore for more than a decade,” adds Cheong. “With BNY Mellon’s technical and servicing support, this Cat Bond issuance is a significant milestone in the development of Singapore’s insurance-linked securities (ILS) market. IAG’s deal will be one for the books as the first deal to take advantage of Singapore’s brand-new ILS laws.”

This deal highlights the potential of the ILS market in the region, and is aligned with Singapore’s efforts to establish itself as a global hub for Asian risk transfer.

Singapore has taken steps to establish itself as an ILS domicile. As part of these efforts, the Monetary Authority of Singapore (MAS) introduced an ILS grant scheme in February 2018. The grant scheme, which was developed in consultation with industry experts including GC Securities and IAG, funds upfront ILS bond issuance costs.

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