King Max Re DAC 2023

This the first catastrophe bond to be sponsored by German domestic market company Versicherungskammer Bayern Versicherungsanstalt des oeffentlichen Rechts’ (VKB) to transfer catastrophe risks from certain underwriting entities to the capital markets, we understand.

VKB is one of the top ten largest insurance groups in Germany, having the largest public-sector insurance operation and one of the largest primary insurance franchises.

VKB Re, or Versicherungskammer Bayern Konzern-Rückversicherung Aktiengesellschaft, is a subsidiary of the group, acting as an internal reinsurer and pooling certain of the group’s risks, making it an ideal company to front the capital markets for VKB.

We’re told that VKB is seeking €150 million in multi-peril reinsurance on a collateralized basis with this first King Max Re Series 2023-1 catastrophe bond.

King Max Re DAC has been established in Ireland as the issuer for catastrophe bonds for VKB and a single tranche of notes to be issued by King Max Re will be offered to cat bond funds and investors, with the proceeds to be used to collateralize a reinsurance agreement between the issuer and VKB Re.

The single tranche of Series 2023-1 Class A notes on offer will provide the insurance group with indemnity and per-occurrence reinsurance coverage against losses from the perils of earthquake, hailstorm, flood and windstorm in Germany, over a three year term beginning January 1st 2024, we understand.

The notes have an initial attachment point at €900 million of losses and coverage would exhaust at €1.1 billion, giving them an initial attachment probability of 0.95%, an initial expected loss of 0.81%.

We’re told the price guidance is currently offering a spread of 4.25% to 5% to cat bond investors.

Update 1:

We understand that VKB is now targeting up to €175m of reinsurance from its debut King Max Re DAC catastrophe bond issuance.

We’re also told that the spread guidance has now been fixed at the top-end of 5%.