GC Securities cites investor support for Queen Street IX Re cat bond

by Artemis on March 12, 2014

GC Securities, the capital markets and investment banking arm of reinsurance broker Guy Carpenter, cites the ‘tremendous support’ that investors showed for reinsurer Munich Re’s latest catastrophe bond transaction, Queen Street IX Re Limited.

GC Securities played the role of the sole bookrunner for the latest Munich Re cat bond, Queen Street IX Re, bringing the number of Queen Street cat bond deals on which GC Securities has served as a service provider to six of its nine transactions to date.

David Priebe, Vice Chairman of Guy Carpenter and Head of GC Securities, commented; “Munich Re’s ability to optimize its hedging opportunities in these improved market conditions was again exemplified by the Queen Street IX Re Limited cat bond issuance. GC Securities is honored to have assisted Munich Re in the offering of the Notes.”

In total GC Securities has raised $600m of catastrophe bond protection for Munich Re since 2011 through the six transactions. In total Munich Re has secured just over a billion dollars of retrocessional reinsurance protection from its nine Queen Street cat bond transactions (details on all of them can be found in the Artemis Deal Directory).

GC Securities today announced the successful placement of $100m of Principal At-Risk Notes through the newly formed catastrophe bond, Queen Street IX Re Limited, to the benefit of Munich Re. GC Securities notes that this is the first cat bond issuance benefitting Munich Re which has used an Irish special purpose reinsurance vehicle as the issuer.

The $100m Queen Street IX Re notes provide Munich Re with a three-season source of per-occurrence collateralized retrocession for named storms affecting the United States and for cyclones affecting Australia. GC Securities highlights the 15% saving over the similarly structured Queen Street VIII Re Limited  issued in June 2013, which it says demonstrates the continuing robust investor demand for cat bonds.

Cory Anger, Global Head of ILS Structuring at GC Securities, highlighted the strong capital markets support for the deal; “Munich Re’s ability to offer a cat bond with a favorable peril mix of Australia cyclone paired with US hurricane in a transparent non-indemnity format at a risk layer that offers higher spread was the catalyst to the tremendous support that the capital markets provided.”

Interestingly GC Securities said that this cat bond was placed with a particularly broad spectrum of investors, which again demonstrates demand, but also shows Munich Re being helped to take advantage of investor interest by spreading the book across as many investors as possible.

Cory Anger continued; “Queen Street IX was one of the broadest cat bond placements with respect to investor interest and the final number of participating investors thereby allowing Munich Re to receive best execution to support application of cat bond protection to a multi-peril transaction that includes a non-peak peril.”

Chi Hum, Global Head of ILS Distribution at GC Securities, said that the interest in cat bonds is creating a ‘sponsors market’ opportunity; “The capital markets capacity continues to grow and combined with a strong interest in diversifying cat risks has presented a market opportunity for catastrophe bond issuers that was very much a benefit to Munich Re’s Queen Street Re IX deal.”

The Queen Street IX Re cat bond offered investors a good return opportunity, compared to some of the low coupons on offer lately, which Hum said aided in the deals execution; “A higher risk return profile relative to other market offerings also facilitated good execution at an attractive price for this capacity. The market recognizes and continues to support the Queen Street series of catastrophe bonds from this sophisticated capital markets issuer and we at GC Securities are pleased to have brought this to market on behalf of Munich Re.”

Munich Re itself also acknowledged capital markets conditions in helping its latest cat bond through at attractive rates when it said that Queen Street IX Re was well received by investors. Conditions for new cat bond issuance remain attractive and the forward pipeline is expected to be busy through the run up to the mid-year renewals and the Atlantic hurricane season.

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