Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Matterhorn Re Ltd. (Series 2020-1)

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Matterhorn Re Ltd. (Series 2020-1) – At a glance:

  • Issuer: Matterhorn Re Ltd.
  • Cedent / sponsor: Swiss Re
  • Placement / structuring agent/s: Swiss Re Capital Markets is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. named storm
  • Size: $350m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Jan 2020

Matterhorn Re Ltd. (Series 2020-1) – Full details:

Global reinsurance giant Swiss Re is back with its second Matterhorn Re catastrophe bond transaction, as the company seeks to expand on its capital markets backed sources of retrocession with a deal targeting $175 million or more of coverage against named storms.

Bermuda based SPI Matterhorn Re Ltd. will issue two tranches of Series 2020-1 notes we’re told, with each covering a different layer of risk for Swiss Re.

These notes will be sold to cat bond investors and the proceeds used as collateral to back retrocessional reinsurance agreements between the issuer Matterhorn Re and sponsor Swiss Re.

The coverage will be for U.S. named storm losses, on a weighted industry loss and per-occurrence basis, we understand, with coverage across two full wind seasons or approximately two years.

The coverage is slightly different across the two tranches of notes as well, in terms of geography.

The Class A tranche of Matterhorn Re 2020 notes covers Swiss Re against named storm losses across much of the U.S. coastline from Texas to Maine, while the Class B tranche is more limited in coverage being northeast only, or states from from Virginia to Maine.

The first tranche of Series 2020-1 Class A notes is targeting $100 million of protection for Swiss Re, we’re told, with these notes having an initial expected loss of 2.82% and being offered to investors with coupon guidance in a range from 5.5% to 6%.

The second tranche of Series 2020-1 Class B notes is targeting $75 million of coverage, with an initial expected loss of 3.6% and coupon price guidance of 8% to 8.75%.

Update 1:

The latest catastrophe bond from global reinsurance firm Swiss Re has been well-received by the ILS investor base, helping the Matterhorn Re Ltd. (Series 2020-1) cat bond double in size while marketing to become a $350 million issuance.

The Class A tranche has increased in size to $175 million, while at the same time the coupon pricing has now been fixed at 5.25%, so below the bottom end of initial guidance (an almost 9% fall in pricing from the original mid-point of guidance).

The Class B tranche of notes has more than doubled in size to also reach $175 million and the pricing has again fallen to below the initial range, this time quite significantly to a coupon of 7.5% (a more than 10% fall in pricing from the original mid-point of guidance).

So for Swiss Re this looks like a very successful catastrophe bond issuance with attractive pricing and execution, as the deal size has doubled while pricing of the Class A and B tranches of notes have fallen by 9% and 10% respectively.

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