22 March 2021

Guernsey unveils world’s first ever humanitarian cat bond

The first humanitarian catastrophe bond covering pure volcanic eruption has been completed using a Guernsey insurance-linked securities (ILS) structure.

The cat bond covers the risk of eruption of 10 volcanoes across three continents and raised $3 million. The capital will be used to support humanitarian aid in the aftermath of an eruption.

The $3 million privately-placed issuance was sponsored by the Danish Red Cross and brought to market by Replexus and Howden Capital Markets through a Guernsey-domiciled reinsurance structure, Dunant Re IC.

Dunant Re IC is an incorporated cell of Replexus ICC (Guernsey), which is managed in Guernsey by Aon Insurance Managers.

The bonds were settled using Replexus’ unique blockchain-based ILS platform, the ILSBlockchain.

Initial investors in the volcano cat bond included ILS specialist managers Plenum Investments, Schroder Investment Management and Solidum Partners.

Rupert Pleasant, chief executive officer at Guernsey Finance, said it was a great result for the Danish Red Cross, Replexus and Guernsey. “This is a world first and truly unique example of sustainable finance in the humanitarian market,” he said.

Andy Sloan, chair of Guernsey Green Finance, added: “Guernsey’s leadership and innovation across ILS, technology and sustainable finance was absolutely central to this bond issuance, which provides opportunity for investors to support NGOs responding to different types of CAT risk.”

Paul Sykes, managing director at Aon, said: “The transaction demonstrates Guernsey's credentials in the ILS and Sustainable Finance space which we expect to grow significantly in the future.”