Industry News
 Should one invest in debt instruments issued by insurance companies and CoCo bonds?
Source: Le Temps  - Wednesday, February 29, 2012

Insurance companies are issuing subordinated bonds for regulatory reasons. While institutional investors do value some of the debt instruments that have been issued, they completely seem to dislike CoCo Bonds and their risks.

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 Hybrid bonds – pleasure or pain?
Source: Institutional Money Institutional Investors Portal  - Tuesday, December 20, 2011
Basel III and Solvency II cause subordinated bonds of banks and insurance companies to no longer qualify for Tier I and Tier II-capital. This creates investment opportunities.
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 European insurance, round II
Source: Credit Research Sarasin  - Monday, December 12, 2011
• Credit markets still largely underestimate the relative robustness of insurers

• The recent outperformance of subordinated insurance versus bank debt will continue

• Senior insurance bonds are also attractive versus bonds of non-financial corporations
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 Catastrophic year is a signal to buy
Source: IPE November 2011, p.92 Daniel Grieger, Kristina Poliakova  - Thursday, November 03, 2011
The asset class of insurance-linked securities (ILS) has withstood the financial crisis well and more pension funds are beginning to realise that ILS can be a source of attractive returns with little correlation to other asset classes.
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 Versicherungs-Anleihen zum Schnäppchenpreis - Insurance bonds are a bargain
Source: Neue Zürcher Zeitung, Michael Rasch  - Thursday, October 20, 2011
Some subordinated bonds of European insurance companies are trading significantly below their par values. Due to the advent of Solvency II, the remaining maturity of these bonds is short dated. Investors are betting on capital gains due to early redemptions.
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 EU Rules May Increase Appeal of Insurers’ Subordinated Bonds
Source: Bloomberg   - Friday, October 14, 2011
Oct. 14 (Bloomberg) -- European insurers, including Axa SA and Allianz SE, may redeem subordinated bonds depressed by the region’s debt crisis because they won’t qualify as core capital under rules being introduced in 2013, investors say.
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 Investors prefer private ILS to cat bonds - Twelve Capital
Source: Thomson Reuters ILS Communities site   - Tuesday, September 27, 2011
LONDON, Sept 27 (Reuters) - Any future growth in the Insurance Linked Securities (ILS) sector will be in private reinsurance deals rather than the catastrophe bond sector which does not offer sufficiently high returns, according to ILS investor Twelve Capital.
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 Short-lived Perpetuals - Kurze Ewigkeit
Source: Handelszeitung, Urs Aeberli  - Thursday, September 08, 2011
Subordinated bonds issued by insurance companies are currently traded at considerable discounts. Thus, these instruments offer truly attractive current yield levels. In addition, the advent of Solvency II is expected to trigger the redemption of subordinated debt due to a lack of solvency recognition under the new regime. As such repayment of debt will be made at par, the transition to Solvency II creates additional return potential for subordinated debt.
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 Insurance-linked securities as an asset class for pension funds
Source: Institutional Investment,  Asset Management Portal  - Monday, July 18, 2011
The asset class of Insurance-linked Securities (ILS) is becoming more popular and ever more pension funds are using its advantages. The most recent natural catastrophes have even increased the appeal of this asset class.
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 Eight good reasons (at least) to buy European insurance bonds
Source: Credit Research Sarasin  - Wednesday, June 15, 2011
European insurers have been remarkably resilient throughout the crisis and appear better positioned than banks to cope with the current challenges. Yet, relative valuations have cheapened, making insurers’ bonds particularly attractive.
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 Resilient catastrophe bonds - Unerschütterliche Katastrophen-Bonds
Source: Neue Zürcher Zeitung, Benjamin Triebe  - Tuesday, April 19, 2011
More than a month after the earthquake in Japan a default of a catastrophe bond becomes ever more likely.
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 A Primer on Insurance-Linked Securities
Source: GesKR 2010, 503 f.; Dike Verlag   - Monday, February 07, 2011
Christoph Buerer, Partner of Twelve Capital, reviews the drivers behind the emergence of insurance-linked securities (ILS) and elaborates on the workings of ILS, placing a special emphasis on the general legal framework within which ILS operate.

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 Catastrophe bond market attracts new investors - Further growth expected in 2011
Source: Munich Re, Press release   - Tuesday, January 25, 2011
The market for catastrophe bonds has grown in 2010 and will continue to expand this year. The volume of newly issued catastrophe bonds is likely to be in the region of US$ 5.5–6bn in 2011. Thus the amount of new issues will again exceed that of maturing bonds so that the volume of outstanding bonds will increase.
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 SCOR successfully places CHF 400 million perpetual subordinated notes
Source: SCOR, Press release   - Friday, January 21, 2011
On January 20, 2011, Scor placed CHF 400mn subordinated bonds. The issue size was doubled due to high demand and the coupon was lowered from 5.5% to 5.375 % during the book building.

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 Aviva briefs investors on the quality of its balance sheet
Source: AVIVA, News release   - Thursday, January 20, 2011
Aviva has recently announced that they plan to reduce at least GBP 700m hybrid debt over the next three years. Aviva has currently a total of GBP 4.7bn subordinated debt outstanding.
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 Overall picture of natural catastrophes in 2010
Source: Munich Re, Press release   - Monday, January 03, 2011
Several major catastrophes in 2010 resulted in substantial losses and an exceptionally high number of fatalities. The overall picture last year was dominated by an accumulation of severe earthquakes to an extent seldom experienced in recent decades. The high number of weather-related natural catastrophes and record temperatures both globally and in different regions of the world provide further indications of advancing climate change.
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 About “PIIGS” and the Elephant
Source: Neue Zürcher Zeitung Guido Fürer und Jérôme Haegeli  - Friday, December 17, 2010
The regulatory frameworks “Solvency II” and “Basel III” do incentivize banks and insurance companies to increase their holdings of sovereign debt. This is problematic, given the debt crises of many countries.
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 Zurich announces early redemption of subordinated debt
Source: Zurich Financial Services Group  News release  - Monday, November 08, 2010
Zurich Financial Services Group (Zurich) announced on November 8, 2010 that it had exercised its option to early redeem USD 1 billion of subordinated debt.
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 Hybrid bonds issued by banks as a profitable niche
Source: Neue Zürcher Zeitung  Martine Wehlen-Bodé  - Tuesday, October 26, 2010

Risk conscious investors can profit from the advantages of outstanding bonds – before the rules change. The upcoming change of regulation of the banking sector offers investors the possibility to take profit from return possibilities of outstanding hybrid bonds issued by banks. Future new bond issues will have a higher risk profile.

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 Implementing ILS in a diversified pension fund portfolio
Source: Institute of Insurance Economics,  University of St. Gallen  - Monday, October 04, 2010
Why are ILS emerging as an own asset class next to other asset classes such as bonds, equities, hedge funds or commodities? What is the best way to approach ILS as an investment topic? How should a pure ILS portfolio be managed in order to generate sustainable returns? The purpose of this article is to address these kinds of questions and to focus on ILS from an investor’s perspective.
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 Natural Catastrophe Risk - Cats land on their feet
Source: Investments & Pensions Europe (IPE) Martin Steward  - Thursday, September 02, 2010
Catastrophe risk delivered positive returns in 2008 amid rising downside correlation but was not immune from credit exposure, finds Martin Steward

Despite journalists’ clichés about “financial storms” and “seismic shocks to the economy”, there is no scientific evidence that volatile financial markets cause hurricanes or earthquakes (or vice versa). That is why underwriting re-insurance or buying bonds that capitalise such re-insurance seems so robust as a diversifying investment. Sure enough, through 2008 insurers continued paying premiums and returns from cat risk finished the year positive.
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