LONDON Nov 2 Munich Re has
transferred $75 million of its own U.S. hurricane and European
windstorm risks to the capital markets by placing a catastrophe
bond with international investors, it said on Tuesday.
Insurers and reinsurers use catastrophe bonds to transfer to
capital market investors major risks on their books, such as for
storms and earthquakes, freeing up capital to underwrite new
"With this bond, Munich Re obtains relief for losses from
extreme events with a combined statistical return period of
around 35 years," the world's biggest reinsurer said in a
Munich Re acquired coverage for the risks from Queen Street
V Re Ltd, a Bermuda-based special purpose insurer, which then
placed $75 million worth of principal-at-risk notes with a
diversified group of international investors, including hedge
funds, insurers and reinsurers.
The single $75 million tranche of notes was originally
marketed with a pricing guidance of 9.00 percent to 9.75 percent
above the collateral money market fund return.
The transaction finally priced at below the lower end of
that range, at 8.60 percent, said one UK-based investor with
knowledge of the deal.
An industry loss index trigger will be used to determine any
potential losses from either of the two catastrophe types. Loss
aggregator Property Claim Services (PCS) will determine any
market losses from U.S. hurricanes, while Perils AG will assess
losses from European windstorms. Risk modeling for the bond will
be done by AIR Worldwide.
This is the third time in 2012 that Munich Re has
transferred storm risks to the capital markets through a Queen
Street vehicle, which now provides the reinsurer with $250
million of coverage against U.S. hurricane and European
Munich Re board member Thomas Blunck said Munich Re investor
demand was high.
"Investors still appreciate the transparent risk/return
profile and the diversifying effect from cat bonds that are
virtually uncorrelated with trends on the capital markets,"
Blunck said in a statement.
Munich Re transferred $552 million in risks to the capital
markets in 2011, including $350 million for its own book in
Cat bond issuance so far in 2012 has climbed to $4.8
billion, compared with $4.3 billion in 2011.
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(Editing by Hugh Lawson)