Japan: MS&AD issues first CAT bond against flood and typhoon risks
Source: Asia Insurance Review | May 2018
Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance, which are subsidiaries of MS&AD Insurance Group Holdings, have jointly sponsored the first catastrophe bond in the non-life insurance industry to provide protection against flood risks as well as typhoon risks in Japan, according to a corporate statement.
Dubbed Akibare Re Series 2018-1, the CAT bond is issued to institutional investors via Akibare Re, a Bermuda-domiciled special purpose insurer. The CAT bond is structured so that all or part of the principal otherwise due for return to investors at maturity would be transferred to the sponsors, if the incurred loss amount from natural catastrophe events in Japan exceeds a pre-defined threshold.
The insurers jointly sponsored the CAT bond issue because in recent years, Japan has experienced an increasing number of large losses resulting from natural catastrophes, such as typhoon and flood events. Furthermore, there is growing interest amongst institutional investors in CAT bonds covering natural catastrophe risks in Japan. In addition, the joint sponsorship helps the insurers to lower the costs of risk transfer. A