Generali returns to ILS market with first green cat bond

Italian insurer  Generali has returned to the insurance-linked securities (ILS) market with its first catastrophe bond targeting green finance solutions, following  two green bond deals in recent years and a  sustainability bond launched last week.

The new €200 million cat bond will provide cover against European windstorms and Italian earthquakes over a four-year period.

The transaction is the first ever ILS issuance that embeds innovative green features in compliance with the Generali Green ILS Framework.

The insurer has entered into a collateralised multi-year reinsurance agreement with Lion III Re DAC, an Irish designated activity company. Lion III Re DAC, in turn, has issued a single tranche of notes in an amount of €200 million to fund its obligations under the reinsurance agreement, and the notes have been placed with capital markets investors in a Rule 144A offering.

Generali has secured the protection at a premium of 3.50 percent per annum on the €200 million cover under the reinsurance agreement, which Lion III Re DAC will in turn pay to investors as a component of the interest paid on the notes.

According to the terms of the offering all or a portion of the interest amount and the principal payable in respect of the notes will be reduced in case of losses sustained by Generali Group due to earthquakes in Italy or windstorms in Europe exceeding a predefined threshold for each peril.

Generali's freed-up capital resulting from this transaction will be allocated to green projects. The collateral will be invested into highly rated green notes issued by the EBRD. Generali said there will be a dedicated reporting of the allocation of freed-up capital in eligible projects as well as EBRD reporting on its Green Projects Portfolio which will be provided. In addition, the primary service providers engaged have shown commitment to a sustainability framework in their business activities.

GC Securities, a division of MMC Securities LLC, acted as a Sole Structurer of the transaction and Joint Bookrunner, Barclays acted as Sole Green Structuring Advisor and Joint Bookrunner, Natixis acted as a Sole Green Coordinator and Joint Bookrunner.

The Generali Group chief insurance & investment officer, Sandro Panizza, said: “ Generali has proven once more its confidence and proximity to investors as well to traditional reinsurers. This new issuance allows Generali to further optimise the purchase of reinsurance protection, leveraging on the trust of both the traditional reinsurance and the ILS markets in the quality of its portfolio. Investor interest for the notes issued by Lion III Re DAC allowed Generali to achieve a better risk return trade-off for the overall reinsurance programme.”

The Generali Group CFO, Cristiano Borean, stated: “The success achieved with this third catastrophe bond confirms Generali’s well-established presence in the ILS market. This transaction further demonstrates Generali’s innovative approach in implementing its capital management strategy, while integrating sustainability principles into alternative risk transfer solutions. The commitment towards the Generali Green ILS Framework is also a clear confirmation of our sustainability ambition to further support green projects and mobilize all our stakeholders around this objective.”

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