Turkey Debuts $400M CAT Bond

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The Turkish Catastrophe Insurance Pool (TCIP) issued a $400 million catastrophe bond called Bosphorus 1 Re Ltd. Series 2013-1.

This is the first time that the TCIP has directly used the cat bond market to manage its earthquake risks in the Istanbul region. GC Securities served as sole bookrunner, co-structurer and co-lead manager.  

The bond provides three years of earthquake protection to earthquakes affecting the Istanbul region and is triggered based on certain ground motion measurements captured at certain ground motion seismometers that are part of the Istanbul Early Warning and Rapid Response System, GC Securities said in a press release today.

Chi Hum global head of ILS distribution at GC Securities, said that the deal priced to good investor demand. The notes were rated ‘BB+’ by Standard & Poor’s and priced with a coupon of 2.50%.

The funds in the collateral account were initially invested in a money market fund, MEAG Bosphorus 1/I, set up especially for this transaction and managed by MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH, according to S&P's presale report.

"As the TCIP is unrated, it funds a periodic payment deposit account--initially with 190 days' worth of premium--to mitigate the risk of nonpayment of the quarterly premium payment. The deposit account ensures that scheduled interest for two accrual periods can be paid, even if the transaction terminates early because the ceding insurer has failed to pay its reinsurance premium," S&P said.

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