Queen City Re cat bond launched for American Modern Insurance Group

by Artemis on December 10, 2013

Munich Re’s U.S. insurance subsidiary, American Modern Insurance Group Inc., is sponsoring its first catastrophe bond. Queen City Re Ltd. (Series 2013-1) has launched this week to investors and is seeking named storm reinsurance protection for the insurer.

Queen City Re Ltd. is a Bermuda domiciled special purpose insurer, established to issue series of catastrophe bond notes to provide a source of fully-collateralized, capital markets backed, reinsurance protection to American Modern Insurance Group Inc. and subsidiaries.

We understand that this first Series 2013-1 transaction will see a cat bond of at least $75m in size issued. The Queen City Re cat bond will provide American Modern Insurance Group subsidiaries with a three-year source of reinsurance protection against named storms (so tropical storms and hurricanes) on an indemnity and per-occurrence basis.

The single tranche of Series 2013-1 notes have an attachment probability of 1.46%, an expected loss of 0.46% and an exhaustion probability of 0.1%. The attachment point is $200m of losses and the exhaustion point is $500m of losses, so the deal covers a $300m layer of American Modern’s reinsurance tower.

Sources explained that the subject business covered by the Queen City Re cat bond includes residential properties, financial institutions lines associated with residences and some recreational products such as boats.

The notes are being offered to investors with a coupon price guide range of 4% to 4.75% we’re told.

Munich Re is acting as structurer of this cat bond and Willis Capital Markets & Advisory is acting as bookrunner. AIR Worldwide is providing risk modelling services.

This deal is scheduled to be completed next week, according to sources, so again as with the other two catastrophe bonds we announced yesterday, Loma Reinsurance (Bermuda) Ltd. (Series 2013-1) and VenTerra Re Ltd. (Series 2013-1), it will count towards the 2013 issuance total.

The sudden flurry of activity in the cat bond market is a little unusual and suggests that sponsors may have been waiting to receive final details on their traditional renewal terms before deciding to launch their cat bonds. The addition of three cat bonds so far this week will please ILS investors and ILS fund managers who, until yesterday, may have been wondering whether they would get a chance to acquire some new risks before the end of the year.

We’ve added Queen City Re Ltd. (Series 2013-1) to our catastrophe bond Deal Directory and will keep that entry updated as more details become available.

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