Queen Street VII Re Ltd. – Full details:
This latest catastrophe bond from regular sponsor Munich Re is almost a copy of their recent Queen Street VI Re Ltd. transaction.
Queen Street VII Re Ltd. covers the same perils of U.S. hurricane and European windstorm, both on a per-occurrence basis and through this transaction Munich Re are seeking to increase and extend their cat bond sourced fully-collateralized retro reinsurance cover for these perils.
The transaction is structured in a single tranche of notes with a current size of $75m although that could likely increase with investor demand (as Queen Street VI did).
Queen Street VII Re Ltd. is a Bermuda registered special purpose insurer and will enter into a retrocession contract with Munich Re. The sale of the notes issued by Queen Street VII Re will collateralize that retrocession contract.
The transaction will cover U.S. hurricane risks across most exposed states on the east and gulf coasts, including Florida. European windstorm cover is for all the usual PERILS covered countries. Cover for both perils is on a per-occurrence basis.
Both perils will use an industry loss index trigger. For U.S. hurricanes a PCS line of business and county weighted index trigger will be used. For European windstorm a PERILS cresta zone weighted industry loss index trigger will be used.
The notes cover losses from a hurricane index value attachment point of 84,000 and a hurricane index value exhaustion point of 130,000, and losses between the European windstorm index value attachment point of 13,000 and the European windstorm index value exhaustion point of 17,500. Both index values are calculated on a per-occurrence basis.
Hurricane cover is for the following states: Alabama, Arkansas, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, and West Virginia.
European windstorm cover is for the following European countries: Belgium, Denmark, mainland Metropolitan France and Corsica, Germany, Luxembourg, The Netherlands, Norway, the Republic of Ireland, Sweden, Switzerland, and the U.K.
The risk period for this transaction runs as follows. European windstorm exposure begins on 1st November and runs to 31st March 2016, so covering four European windstorm seasons. The U.S. hurricane cover begins on 1st April 2013 and runs till 31st March 2016, so covering three hurricane seasons.
Demand for this cat bond caused spreads to tighten resulting in a drop in pricing before close. The single $75m tranche of notes was originally marketed with a pricing guidance of 9.00% to 9.75% above the collateral money market fund return. When it finally priced it was at below the lower end of that range, at 8.60%.