Munich Re completes Queen Street VII Re catastrophe bond

by Artemis on November 6, 2012

Munich Re has released some comments on their recently completed Queen Street VII Re Ltd. catastrophe bond, the third to complete in recent days along with Mythen Re and Atlas Re VII which we covered earlier. This leaves the cat bond market pipeline a little quiet although we understand there will be more to come this month. Queen Street VII Re’s completion  has secured Munich Re a source of retrocessional reinsurance for U.S. hurricanes and European windstorms.

Queen Street VII saw Munich Re seeking a source of fully-collateralized U.S. hurricane and European windstorm cover using industry loss triggers and on a per-occurrence basis. The $75m deal is the third time this year that Munich Re has issued a cat bond through a Queen Street vehicle, with Queen Street VI Re in July and Queen Street V Re in February.

The transaction is similar to previous Queen Street cat bonds and Munich Re structured and arranged the deal themselves. The catastrophe bond matures on 8 April 2016 and was issued through Queen Street VII Re Limited, a Bermuda registered special purpose insurer. The single tranche of $75m of cat bond notes issued by Queen Street VII were admitted for listing on the Bermuda Stock Exchange. Risk modelling for the deal was undertaken by AIR Worldwide, while PCS and PERILS are providing loss data and index calculation for the two perils triggers.

Munich Re said that Queen Street VII Re  affords them relief for losses from extreme events with a combined statistical return period of around 35 years, quite a typical return period for cat bond issuance. The bond received a rating of B from Standard & Poor’s, and the risk premium, or coupon, is 8.60%.

The Queen Street VII cat bond has been placed globally among a broadly diversified group of international investors mainly comprising investment funds and hedge funds, but also insurers, according to Munich Re.

Munich Re board member Thomas Blunck commented; “Munich Re has again used the current market environment to acquire coverage for our own book against events with a comparably high probability of occurrence. The response by investors has been positive. 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.”

Willis Capital Markets & Advisory (WCMA), the insurance industry investment banking arm of broker Willis, acted as sole bookrunner on this $75m Queen Street VII Re catastrophe bond.

Tony Ursano, CEO, WCMA, said; “We are delighted to have acted as Sole Bookrunner for Munich Re’s successful Queen Street VII issuance. This transaction further demonstrates the strong investor demand at present for risk in catastrophe bond form. WCMA remains ready and able to structure and execute catastrophe bond transactions for our clients.”

More information on Queen Street VII can be found in our catastrophe bond Deal Directory.

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