IAG forms first-ever catastrophe bond in Singapore under new ILS regulations


In a significant step for expansion of insurance-linked securities (ILS) in Asia-Pacific, the first ever catastrophe bond in Singapore has been issued, Orchard ILS Pte.

Insurance Australia Group (IAG) sponsored the cat bond as part of its 2019 catastrophe aggregate reinsurance cover - also representing the first such transaction by the company.

The bond provides IAG with A$75 million ($53.8 million) of annual aggregate catastrophe protection for three years and is part of its aggregate sideways cover, which in total provides protection of A$475 million excess of A$375 million.

GC Securities acted as sole structuring and sole placement agent for the cat bond issued by Orchard ILS Pte.

This deal follows the Monetary Authority of Singapore (MAS) introducing the ILS grant scheme in February 2018, and has been incorporated under the Special Purpose Reinsurance Vehicle (SPRV) regulations.

The scheme was developed to help Singapore establish itself as a global hub for Asian risk transfer.

“The IAG cat bond issuance is a significant milestone in the development of Singapore’s ILS market,” said Ng Yao Loong, assistant managing director, development and international group, MAS. “It demonstrates the growing capabilities of the Singapore financial sector in delivering such innovative capital market solutions. The re/insurance industry, multilateral organisations and sovereigns are now able to tap additional risk transfer mechanisms to better address Asia’s disaster protection needs.”

David Priebe, vice chairman at Guy Carpenter, commented: “Singapore’s ILS grant scheme is an excellent initiative that has played an important part in enabling this transaction to take place. We hope the pioneering work of IAG, MAS, and GC Securities provides a springboard for greater use of insurance linked securities to close the protection gap in Asia and promote sustainable economic development in one of the most dynamic regions of the world.”

IAG, ILS, Cat bond, MAS, Guy Carpenter, Singapore, Bermuda

Bermuda Re