When TD Insurance helped bring Canada’s first catastrophe bond to market, it was a breakthrough for the country’s risk-transfer landscape – but it wasn’t without major hurdles. According to Debdatta Bose (pictured centre left), assistant vice president at TD Insurance, navigating the complexities of alternative capital, regulation, and timing required constant problem-solving.
Bose, speaking during a panel at the National Insurance Conference of Canada (NICC), said the process revealed several unexpected barriers unique to the Canadian market.
“When you’re first to market, there are a lot of unknown unknowns, and we have to keep solving for them,” she said.
One of the biggest obstacles, she explained, involved the regulatory requirements surrounding collateralized reinsurance structures. Under Canadian rules, proceeds from investors – which serve as the collateral – must be invested in Canadian dollar–denominated funds that are both highly liquid and high quality. That proved more difficult than expected.
“What that means is we are looking for things like large Canadian money market funds,” Bose said. “When we went through the process, we realized that those are not very common in Canada, and that becomes a challenge because it becomes hard to attract global investor interest.”
That scarcity of suitable domestic funds limited flexibility and slowed investor participation, she noted, adding another layer of complexity to the transaction.
Beyond regulation, Bose said the CAT bond’s structural and logistical demands made it more intricate than a traditional reinsurance placement. The process required an extensive offering circular, detailed investor due diligence, and coordination among multiple third-party participants.
“It is different from traditional reinsurance,” she said.
There is a significant amount of additional documentation, due diligence, and processing which has to go out to investors for the offering circular. There are several different parties as part of the transaction, and contracting them all out in a timely way so that there is no coverage gap, she explained, was no easy task.
“Those are some very big challenges,” she said.
The alignment between the bond’s closing timeline and TD’s annual reinsurance renewal schedule added further pressure. Missing that coordination could have created exposure gaps – something the team worked hard to avoid.
Still, Bose noted that the experience underscored the importance of persistence in developing new forms of risk transfer.
“For us, it was ‘second time is the charm,’” she said. “It didn’t work out the first time – but if you believe in it, you try again.”
The transaction, completed in January 2025, marked a milestone for both TD Insurance and the Canadian market. It became the country’s first catastrophe bond denominated in Canadian dollars, offering coverage for domestic perils such as earthquakes and severe convective storms.
The $150-million bond is designed to trigger once insured losses exceed $2.35 billion, up to a cap of $2.5 billion.
The bond has a three-year term, running from Jan. 17, 2025, to Dec. 31, 2027, and features an annual reset. Unlike traditional reinsurance contracts, it cannot be reinstated once triggered. Over the life of the bond, investors receive the agreed-upon risk spread and interest on the collateral; if no qualifying catastrophe occurs, the principal is returned at maturity.
“At TD Insurance, being there for our customers during their time of need remains our most important focus, and the issuance of a cat bond helps ensure we can continue to protect them when it matters most,” said James Russell, president and chief executive officer of TD Insurance, after the issuance. “At a time of increasing costs, we’re always looking for ways to provide the best possible pricing to our customers, and this new bond is another tool at our disposal.”
As Bose noted during the panel, finding suitable investment vehicles in Canada proved difficult. Large money market funds in Canadian dollars are relatively scarce, making it harder to attract the scale of global capital that typically supports CAT bond placements.
To meet both investor expectations and Canadian regulatory requirements, TD Insurance ultimately settled on a novel solution – a puttable floater issued by the European Bank for Reconstruction and Development (EBRD) – which satisfied the need for liquidity, credit quality, and currency alignment.
