Swiss Re Capital brought a $120 million CAT bond to the market last week against risk of hurricanes in Puerto Rico and Florida and windstorms in France. The bond has a four-year average life structure and priced last Monday at 525 basis points over the one-month Libor on the French Windstorms A1 class and 575 basis points over one-month Libor on the A2 class, 25 basis points wide of talk.

Lehman Brothers was co-manager, and sources said other CAT bonds that are reaching their final maturity will be hitting the market in the near future.

One seasoned catastrophe bond investor said they turned the deal down as a result of an unusual feature in which investors in either tranche are ultimately exposed to both classes, which contain two very different seasonal risks. For example, "If an investor in the French Windstorms tranche got wiped out, the investors in the U.S. hurricanes piece will become exposed to the French Windstorms," the source said. Furthermore, when the U.S. hurricane season is over the French windstorm season kicks in and the investor is therefore exposed to risk almost all year, for the entire maturity of the bond, sources said. - CG & DG

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