Marsh & McLennan Eyes Cat' Bonds


In the wake of completing a $50 million derivative transaction for earthquake insurance concerns on the New Madrid fault line, Marsh & McLennan Securities Corp. is gearing up two $100 million catastrophe-bond securitizations expected to close before the end of the year.

Both transactions cover multi-peril and multi-geographic zone risk, said Christopher McGhee, head of the risk securitization advisory department at Marsh & McLennan.

McGhee said the size of the upcoming "cat" bond transactions may change before the company tries to price them, and hinted that they would cover such events as hurricanes, earthquakes and northern European winter storms. However, he would not provide any further structural details for the offerings.

These upcoming deals come as the company completed a derivative-backed deal last week, backed by earthquake insurance covering the New Madrid fault line, which is centered in the Midwestern U.S. near Memphis. Unlike the upcoming transactions, the New Madrid deal is single-peril and covers only the area affected by the fault.

What triggered the New Madrid coverage was an index put out by Property Claims Services, which provides estimates of industry losses in the event of specific catastrophes. This same index will tabulate insurance industry losses caused by Hurricane Floyd.

Marsh & McLennan is a subsidiary of Marsh & McLennan Cos., whose holdings include Putnam Investments mutual funds, Mercer Consulting, and Marsh Inc., the world's largest insurance and reinsurance brokerage operation.

The securitization business has been up and running for two years, and acts as an underwriter or advisor on both catastrophe asset-backed transactions, and over-the-counter derivative transactions.