| LONDON, March 7
LONDON, March 7 Munich Re is
marketing a new catastrophe bond through a special purpose
vehicle set up to protect two North Carolina underwriting
associations against $200 million of hurricane losses in the
Standard & Poor's assigned a B+ rating on the Series 2013-1
notes issued by Bermuda-based Tar Heel Re Ltd to cover the North
Carolina Insurance Underwriting Association (NCIUA) and the
North Carolina Joint Underwriting Association (NCJUA), the
credit rating agency said in a statement.
So-called "cat bonds" are used by the insurance industry to
transfer extreme risks, such as those for earthquakes or
hurricanes, to financial market investors, who receive a
handsome yield in return for agreeing to cover damages they
Munich Reinsurance America, a unit of Munich Re which is the
world's biggest reinsurer, will purchase reinsurance from Tar
Heel Re, and transform the proceeds of the bond issue into a
reinsurance agreement for the two North Carolina Associations.
This is the first time a new transaction has come to market
using the U.S. hurricane model from risk analysis firm RMS after
the company fell out of favour with the cat bond sector when it
made changes to its expected loss estimates in 2011.
The alterations led to higher-than-expected losses - making
the risk of a U.S. hurricane significantly more expensive for
some reinsurers and insurers.
This is the fourth cat bond issued by Munich Re to cover the
NCJUA and the NCIUA from North Carolina hurricanes, but the
first under the Tar Heel Re vehicle.
The new deal will replace expiring cover from another cat
bond deal - also under the Johnston Re programme - that will
expire in May this year.
Notes issued via Tar Heel Re adds another layer of cover to
the 2011 transaction, Johnston Re - a $202 million cat bond
programme issued by Munich Re, which is due to mature in 2014.
The NCJUA and the NCIUA first sponsored a cat bond in 2009
with a $200 million transaction with Swiss Re's Parkton Re
- To join the Thomson Reuters Insurance Linked Securities
Community for more news and analysis, click here
(Reporting by Sarah Mortimer; Editing by Susan Fenton)