Swiss Re Insurance-Linked Fund Management

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Matterhorn Re Ltd. (Series 2020-5)

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Matterhorn Re Ltd. (Series 2020-5) – At a glance:

  • Issuer: Matterhorn Re Ltd. (Series 2020-5)
  • Cedent / sponsor: Swiss Re
  • Placement / structuring agent/s: Swiss Re Capital Markets is sole structuring agent and sole bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S. named storm
  • Size: $300m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Dec 2020

Matterhorn Re Ltd. (Series 2020-5) – Full details:

This is global reinsurance firm Swiss Re’s fifth Matterhorn Re Ltd. catastrophe bond issuance of 2020 and sixth in 18 months since it launched this cat bond program.

For this latest and fifth deal of 2020, we’re told that Matterhorn Re Ltd., a Bermuda based special purpose insurer, will look to issue two tranches of Series 2020-5 cat bond notes that will be sold to investors and the proceeds used to collateralise retrocessional reinsurance agreements between the SPI and sponsor Swiss Re.

In total, Swiss Re is seeking at least $150 million of collateralized retrocessional reinsurance against certain U.S. named storm losses with this Matterhorn Re 2020-5 cat bond deal.

The protection will be across a two year period to the end of November 2022 (so covering two U.S. hurricane seasons) on a per-occurrence basis, using weighted industry loss index triggers, we understand.

The two tranches differ slightly in terms of regions covered, making one slightly riskier than the other due to the inclusion of southern and Gulf Coast states, plus Florida.

Matterhorn Re Ltd. will issue an at least $75 million Series 2020-5 Class A tranche of notes that we’re told will cover northeast U.S. named storm risks, with these notes having an initial expected loss of 2.4% and being offered to investors with coupon price guidance in a range from 4.5% to 5%.

The SPI will also issue an at least $75 million Series 2020-5 Class B tranche of notes, which we’re told are the slightly riskier due to having a broader coverage area that includes the east coast, Florida, certain Gulf Coast states and also Puerto Rico. This tranche of notes have an initial expected loss of 2.4% and are being offered to investors with price guidance in a range from 5.75% to 6.25%, we understand.

Swiss Re launched the Matterhorn Re catastrophe bond program at the mid-point of 2019 and since then has sponsored $1.31 billion of these bonds and with this latest deal looks set to take its cat bond supported collateralized catastrophe retrocessional reinsurance to nearer $1.5 billion.

Update 1:

A strong reception and demand from investors helped Swiss Re to secure its latest Matterhorn Re catastrophe bond at double the initial target size, securing $300m of retro reinsurance protection.

With investor demand very strong, both tranches of notes doubled in size to $150m and then priced below their initial guidance ranges, with the Class A notes pricing at 4.25% and the Class B notes at 5.5%.

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