Another of the catastrophe bonds which have yet to close has experienced strong demand resulting in a tightening of spreads and pricing being reduced before close. Queen Street VII Re Ltd. is the latest cat bond from regular sponsor Munich Re. Through the issuance of Queen Street VII, Munich Re are seeking a source of fully-collateralized U.S. hurricane and European windstorm cover using industry loss triggers and on a per-occurrence basis.
Munich Re’s third trip to the catastrophe bond market in 2012, following on from Queen Street V Re Ltd. in February and Queen Street VI Re Ltd. in July, this latest deal is structured in a single tranche of notes exposed to both of the covered perils. The deal is sized at $75m still, so despite demand Munich Re chose not to upsize this cat bond.
In a further demonstration of the demand for cat bonds from investors and the competitive pricing that is attainable for sponsors, spreads have tightened somewhat and Queen Street VII has priced below the initial guidance range.
The single $75m tranche of notes was originally marketed with a price guide range of 9.00% to 9.75% above the collateral money market fund return. Now, as order books closed, the deal priced below the lower end of that range, at 8.60%. Once again this shows that the cat bond market is a great place to transfer risks to right now for sponsors.