May 15, 2006

AXA sets bond issue as bird flu protection

Insurance giant Axa (AXA) is creating a bond to protect itself against the financial impact of an outbreak of bird flu, according to The Daily Telegraph.

The company would use the so-called "extreme mortality" bond to hedge the risk of an unusually high number of its life insurance policyholders dying, the newspaper says.

The insurer is said to have mandated Ixis CIB, Lehman Brothers and Swiss Re Capital Markets to issue the bond, the report says. None of the bankers would comment on the deal but it is thought to be similar to a recent issue by reinsurance company Scottish Re, The Telegraph adds.

In that deal bondholders were paid around 3 percent interest to take the risk that mortality rates during bird flu would jump relative to an index, the newspaper said.