Swiss Re, Munich Re discuss roles in Zurich’s Lakeside Re III catastrophe bond

by Artemis on January 4, 2013

The two firms who played leading roles in bringing the recently completed Lakeside Re III Ltd. catastrophe bond to market for sponsoring insurance group Zurich have spoken out about their roles in the deal. The $270m earthquake cat bond provides Zurich American Insurance, Zurich Insurance Co. Ltd. and some subsidiaries with a three-year source of fully-collateralized earthquake  cover in the U.S. and Canada.

The Lakeside Re III cat bond provides earthquake cover in California, the U.S. and Canadian Pacific northwest and for the New Madrid fault zone region. The annual aggregate cover that Lakeside Re III provides is on an indemnity (ultimate net loss) trigger basis over a three-year risk period to 8th January 2016. Zurich maintains a retained share of at least 10% of the aggregated ultimate net losses for each annual risk period under the terms of the underlying reinsurance contract. Lakeside Re III is a replacement for, and extends, the cover which was provided by now matured Lakeside Re II Ltd.

Swiss Re Capital Markets acted as joint lead structuring agent and sole bookrunner for the Lakeside Re III cat bond in the successful structuring and placement of the $270m of North American earthquake risk with capital markets investors. The placement secured Zurich a three-year source of excess of loss reinsurance protection on an annual aggregate basis for the earthquake risk.

Jean-Louis Monnier, Head of ILS Europe at Swiss Re Capital Markets, commented; “We are delighted to continue our support of Zurich’s risk management objectives. The transaction demonstrates Swiss Re’s strong commitment to serve our clients in transferring natural catastrophe risks to the capital markets and underlines our strong market position in developing innovative and efficient catastrophe bond products.”

Munich Re acted as the other joint lead structuring agent in the Lakeside Re III transaction, assisting Zurich with ensuring the cover was structured to complement other sources of reinsurance and risk transfer. Munich Re also assisted with the collateral arrangements for Lakeside Re III, with the MEAG Lakeside Re III fund which has been established for this cat bond by Munich Re’s asset manager MEAG. This collateral arrangement is similar to Munich Re’s approach with their own Queen Street cat bond series of deals.

Thomas Blunck, a member of Munich Re’s Board of Management, said; “We are pleased to have again assisted our client Zurich Insurance Group with a capital markets transaction. Munich Re offers its clients the full spectrum of risk transfer solutions. Investors continue to appreciate the diversifying effect from cat bonds that are virtually uncorrelated with trends on the capital markets.”

You can read details of the Lakeside Re III Ltd. transaction in our catastrophe bond Deal Directory. You can also read about Zurich’s two previous Lakeside cat bonds, Lakeside Re II Ltd. and Lakeside Re Ltd.

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