FRANKFURT, March 19 (Reuters) - Munich Re (MUVGn.DE) has shifted European windstorm risks, including frequency losses for the first time, to the capital markets through a 170 million euro ($268.8 million) catastrophe bond, the reinsurer said on Wednesday.
A first tranche of the bond with a volume of 100 million euros has been given a B rating by credit rating agency Standard & Poor's, while the second tranche of 70 million euros securitising windstorm frequency losses has been rated "BB+," Munich Re said in a statement. "This provides relief for Munich Re when several moderately severe windstorms occur in any one year," said Munich Re board member Thomas Blunck.
The bonds issued by Queen Street Ltd. are variable rate notes with a term of three years, the world's second-biggest reinsurer said, adding that there was growing demand from its clients for securitisations to cover frequency losses.
"The Queen Street bond programme can therefore be deployed quickly and cost-effectively for our clients, too," Blunck said.
More than 50 million euros of the bond was placed with investors in the European Union and in Switzerland via the Munich Re subsidiary Munich Re Capital Markets, it said.
The turmoil in global credit markets in the wake of the subprime mortgage crisis in the United States has boosted investor interest in insurance-linked bonds issued by reinsurers such as Munich Re, bigger rival Swiss Re RUKN.VX and Hannover Re (HNRGn.DE).
Investors like the fact that the bonds are not correlated to other financial market risks and have relatively straightforward conditions for determining whether losses have occured.
Hannover Re earlier this year predicted that the market for insurance-linked securities could rise by 20 percent this year. (Reporting by Jonathan Gould; Editing by Quentin Bryar)