Turkey Completes a Second Cat Bond for $100M

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The Turkish Catastrophe Insurance Pool (TCIP) has completed a second catastrophe bond through a new shelf bond program dubbed Bosphorus Ltd.

The deal provides three years of protection, on a per occurrence basis, for earthquakes affecting the Istanbul region.

GC Securities, a division of MMC Securities Corp., served as the sole bookrunner on the transaction. Risk Management Solutions served as modeling firm and calculation agent.

The $100 million of Series 2015-1 Notes, which are unrated, will pay investors 3.25% a year, unless certain ground motion measurements are captured by the Istanbul Early Warning and Rapid Response System operated by Bogaziçi University Kandilli Observatory and Earthquake Research Institute.

If the ground motion is detected at a trigger level, TCIP will withhold some or all of the interest and principal payments. This money will be available to pay insurance claims from households and small and medium-sized businesses in the affected region.

TCIP, managed by Eureko Sigorta A.S., first accessed the cat bond market in 2013 via the issuance of $400 million of notes by Bosphorus 1 Re Ltd. Those notes, which were rated ‘BB+’ by Standard & Poor’s, have a coupon of 2.5%.

The parametric trigger for the Series 2015-1 Notes has been enhanced, compared with the earlier deal. TCIP incorporating three new ground motion seismometers within the parametric index, Cory Anger, global head of insurance linked securities structuring at GC Securities, said in a press release published Wednesday.

The latest deal was placed among a broader base of more than 20 investors, Chi Hum, global head of insurance linked securities distribution at GC Securities, said in the same press release.

Turkey is one of the most exposed countries in the world to earthquakes. Around 70% of its population and 75% of its industrial facilities are exposed to large-scale earthquakes, according to the Global Facility for Disaster Reduction and Recovery.  Before 1999, when a major earthquake struck the Marmara region, resulted in the loss of 15,000 lives, few households or businesses were insured. The TCIP was created in 2000, with assistance from the World Bank, to provide affordable coverage.

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