Sydney-based Insurance Australia Group (IAG) has appointed BNY Mellon as trustee for its first-ever catastrophe bonds, which were sold in Singapore under a new initiative introduced in the city state to promote the market for insurance-linked securities (ILS).
The A$75 million (US$52.1 million) bonds were issued this February by Singapore-based special purpose vehicle Orchard ILS, with the proceeds used to provide annual protection for IAG against natural peril risk in Australia and New Zealand for three years.
BNY Mellon is the indenture trustee, reinsurance trustee, paying agent, accounting bank, Singapore security trustee, and trust accountant for the bonds, the US financial services provider says in a statement on May 14.
Catastrophe bonds are risk-linked securities designed to protect insurers against the risk of potential catastrophe.
IAG is the first sponsor of catastrophe bonds in Singapore.
According to Kenneth Cheong, BNY Mellon’s managing director of corporate trust for Asia Pacific, the offering is a “significant milestone in the development of Singapore’s ILS market”.
“IAG’s deal will be one for the books as the first deal to take advantage of Singapore’s brand new ILS laws,” Mr. Cheong says in the statement, adding that it highlights the potential of the market in the region, and is aligned with Singapore’s efforts to establish itself as a global hub for Asian risk transfer.
The laws, which were introduced by the Monetary Authority of Singapore in February, aim to facilitate the use of ILS with measures such as a tax framework that provides so-called tax neutrality to investors.
IAG is the largest general insurance company in Australia and New Zealand, underwriting almost A$12 billion in premiums a year.
BNY Mellon had $34.5 trillion of assets under custody and administration as of March 2019.