Chubb places US$200-million cat bond covering Canadian/U.S. wildfires

The Chubb Group of Insurance Companies has placed a US$200-million catastrophe bond providing multi-year reinsurance protection against hurricanes, earthquakes, thunderstorms, winter storms, wildfires and other perils in both the United States and Canada.The risk period on the bonds ends Mar. 31, 2011. Known as East Lane II Ltd., the bond provides Chubb companies, including the Federal Insurance Co., with a source of indemnity catastrophe coverage on certain commercial and personal lines business for loss events in the covered areas over a three-year risk period.Standard & Poor’s rated the bond’s first two classes of shares ‘BB’ and a third class of shares (related to Canadian perils) a ‘B-.’ The bond is unique in that it provides protection against wildfire events.”East Lane II represents the first occasion that Standard & Poor’s will have assigned a rating to notes issued in connection with a catastrophe bond in which the offering expressly includes the modelled peril of wildfire,” said Standard & Poor’s credit analyst Gary Martucci. “Our review of modelling associated with the modelled peril of wildfire was complicated by the fact that non-natural factors (e.g., arson or the ability or desire of communities to finance and enforce fire suppression measures) could directly impact the inherent risk of the peril.”The bond also covers loss events such as fire, explosion, lightning, volcanic actions, mudslides, the overflowing of a body of water, falling objects, the direct impact of aircraft and collapse of building.