Queen Street II Capital Ltd.

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Queen Street II Capital Ltd. - At a glance:

• Issuer / SPV: Queen Street II Capital Ltd.
• Cedent / Sponsor: Munich Re
• Placement / structuring agent/s: Munich Re are arranging this deal. GC Securities acted as joint-bookrunner and co-lead manager
• Risk modelling / calculation agents etc: AIR Worldwide
• Risks / Perils covered: U.S. hurricane, European windstorm
• Size: $100m
• Trigger type: Industry loss index
• Ratings: S&P: 'BB-'
• Date of issue: Mar 2011
• Artemis.bm news coverage: Articles discussing Queen Street II Capital Ltd. from Artemis.bm

Queen Street II Capital Ltd. - Full details

Munich Re has issued a new catastrophe bond under an Irish special purpose vehicle, Queen Street II Capital Ltd. This is Munich Re’s second Queen Street cat bond transaction.

Queen Street II Capital Ltd. will provide Munich Re with three years of protection on a per-occurrence basis against North Atlantic U.S. hurricane and European windstorms until March 2014.

As well as being the counterparty in this risk transfer Munich Re are also arranging the deal themselves.

The transaction provides Munich Re with cover against U.S. hurricanes in certain states (including the usual east and gulf coast states) and uses an industry loss index from PCS for measurement on that portion of the deals risk. The cover for European windstorms will be active for losses in Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, and the U.K. and will utilise the PERILS AG industry loss data. When losses exceed a predefined attachment point on the indices the cat bond would be triggered.

AIR Worldwide are providing risk modelling for the Queen Street II cat bond using their U.S. hurricane model and European windstorm models. For European windstorms AIR will be augmenting their own industry exposure database with data from the PERILS industry exposure data. An annual reset of payout factors and exposure data will be undertaken which could result in changes to the attachment probability and expected loss after each reset.

Proceeds from the sale of the notes by Queen Street II Capital Ltd. will be invested in a U.S. Treasury money market fund set up specifically for this transaction. A Munich Re subsidiary MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH, will manage the MEAG Queen Street II fund, and is seeking a triple-A rating for it.

The notes priced towards the high end of guidance at 7.5% above U.S. money market funds.

The notes have an expected loss of 1.59% overall, 1.09% for U.S. hurricanes and 0.5% for European windstorms.