Dateline: 08/05/2001
Transaction marks the largest bond issue supported by political risk insurance to date
SCHAUMBURG, IL, May 8, 2001 -- Zurich North America, a leading provider of insurance, financial and risk management solutions, announced that its Emerging Markets Solutions group issued its first political risk insurance policy for capital markets transactions in Brazil. The political risk policy was designed to enhance a seven-year, $450-million bond issue by Petrobras International Finance Company Ltd. (PIFCO). PIFCO is a wholly-owned subsidiary of Petroleo Brasileiro (Petrobras), Brazil’s leading oil and gas company. Funds from the issue will be used to finance the importation of oil and oil products.
Under the terms of a Standby Purchase Agreement, Petrobras has agreed to make payments to the holders of the notes in the event that PIFCO is unable to fulfill its obligations. Zurich Emerging Markets Solutions provided the political risk insurance against the risks of currency inconvertibility, transfer and expropriation of funds with regard to any Petrobras payments made under that agreement. UBS Warburg was the lead arranger for the transaction.
"The political risk insurance was one of the factors that helped the notes secure a Baa1 rating from Moody’s, well above Brazil’s long-term foreign currency rating of B1," stated Susan Knapp, a Vice President in Moody’s Latin American Asset-Backed Securities Group. Zurich remains the leading private insurer of emerging market bond issues against political risks, having completed six major transactions.
Daniel Riordan, executive vice president and managing director at Zurich Emerging Markets Solutions said, "This transaction demonstrates the growing worldwide acceptance of political risk insurance as a key enhancement for bond issues in emerging markets. As the PIFCO bond demonstrates, political risk insurance is a valuable solution in helping capital markets transactions achieve investment grade or above ratings, even for government-owned issuers of non-investment grade status."
Zurich can provide up to $100 million in coverage per transaction and can match the tenor of the insured bond, up to a term of 15 years. Zurich Emerging Markets Solutions has rapidly established itself as a leading underwriter in the political risk market and has written policies covering risks in 70 emerging market countries.
Zurich North America (www.zurichna.com) is a leading commercial property-casualty, health and accident insurance provider serving the multinational, middle market and small business sectors in the United States and Canada. Headquartered in Schaumburg, Ill., Zurich North America has 11,650 employees and writes $8.0 billion in annual premiums. Zurich North America business units are the Zurich U.S. pool of companies (Corporate Customer, Middle Markets, Small Business, Strategic Partnerships, Construction, Specialties, Zurich Global Energy, Warranty, Surety & Financial Enterprises, Empire Fire and Marine and Universal Underwriters Group) and Zurich Canada. The Zurich U.S. pool of companies is rated A+ (Superior) by A.M. Best and AA+ (Excellent) by Standard & Poor's. Zurich North America is a member of the Zurich Financial Services Group.
The Zurich Financial Services Group (www.zurich.com) is a global leader in the financial services industry, providing its customers with solutions in the area of financial protection and asset accumulation. The Group concentrates its activities in five business segments: non-life and life insurance, reinsurance, Farmers Management Services and asset management. Headquartered in Zurich, Switzerland, the Group's worldwide presence builds on strong positions in its three key markets: the United States, the United Kingdom and Switzerland. It has offices in more than 60 countries reaching 35 million customers and employing 73,000 people. Based on consolidated figures for 2000, the Group achieved gross premiums of USD 50 billion. This amount includes insurance deposits as well as premiums from the Farmers P&C Group. The net income amounted to USD 2.33 billion. On December 31, 2000, the Group had USD 440 billion of assets under management of which USD 259 billion represent funds managed for third-party institutional and retail customers.
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Media contacts:
Tina Angelone, Communications
Zurich North America
212-676-4385
tina.angelone@zurichna.com
Betty Schwartz
Miller DeMartine Group
201-567-7783
bschwartz@mdgpr.com