World Cup finals catastrophe-linked bond launched

Fédération Internationale de Football Association (Fifa), football’s world governing body, has launched a catastrophe-linked bond to protect itself against financial losses that would result if the 2006 World Cup finals were to be cancelled.

Investors in the $260 million catastrophe bond issue – dubbed the 2006 FIFA World Cup cancellation bond – take on the risk of cancellation for a broad range of reasons, except for specified triggers that include world war and boycott.

A total of four tranches are being offered; two are denominated in US dollars, while the remainder are in euros and Swiss francs. Ratings agency Moody’s has given all bonds an A3 rating. Credit Suisse First Boston is the bookrunner, and co-lead manager of the deal alongside Swiss Re Capital Markets.

Fifa claims the deal is the first transaction to transfer [sporting] event risk, together with man-made and natural catastrophe risk to the capital markets. It signalled its intent to opt for an alternative risk transfer solution “having carefully evaluated the traditional insurance market”, according to an official statement released earlier this month. Previously, Fifa had found it problematic to get traditional insurance cover for the last World Cup finals, co-hosted by Japan and South Korea in 2002.