ICAP plc, the interdealer broker, and Jardine Lloyd Thompson Group plc have revealed that their joint venture, ICAP-JLT, has brokered its first catastrophe swap transaction.
ICAP plc, the interdealer broker, and Jardine Lloyd Thompson Group plc have revealed that their joint venture, ICAP-JLT, has brokered its first catastrophe swap transaction. The first transaction was a North American windstorm catastrophe swap.
Catastrophe swaps are designed to cover a pure form of risk linked to a single catastrophic event, either windstorms or earthquakes in Europe, North America or Japan. Counterparties who buy catastrophe swaps are effectively buying insurance for the eventuality that a catastrophic event takes place and industry wide insured losses reach a specified threshold.
The joint venture between ICAP and JLT, first announced in February 2007, offers a broker service in markets in which insurance, financial derivatives and securities are converging, as well as originating and structuring transactions in this area.
Dominic Burke, CEO of Jardine Lloyd Thompson, says: "Since announcing the joint venture in February, JLT and ICAP have made significant progress in developing a platform to foster liquid trading and are pleased to report that we have brokered our first catastrophe swap. Our clients, both corporates and reinsurers, will benefit substantially from the additional capacity these types of transactions will generate".
Michael Spencer, CEO of ICAP says, ‘The range and scale of opportunities for capital markets investors to gain exposure to the property catastrophe sector is growing fast. As insurance and capital markets continue to converge, this is a further example of ICAP entering innovative new markets. We are pleased to be working together with a leading risk, insurance and reinsurance broking company to bring these products to the market.’
ICAP and JLT see catastrophe swaps as offering customers increased pricing efficiency, lower frictional costs and transparency. These products are attractive as a hedge for the reinsurance industry or as a way for investors to gain access to a risk category which has low correlation with other asset classes. ICAP and JLT have been encouraged by the strong levels of interest from a broad and diverse potential customer base for these insurance derivatives.
