Swiss Re Insurance-Linked Fund Management

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Further details on completion of the Queen Street III Capital Ltd. catastrophe bond


Further details have emerged on the completion of Munich Re’s latest catastrophe bond transaction issued through their Queen Street III Capital Ltd. special purpose vehicle. The deal completed yesterday, and as we wrote at the time managed to triple the amount of protection originally sought by closing at an upsized $150m.

Munich Re have published a press release on the transaction and said that the catastrophe bond provides them with protection against European windstorm risks with a combined statistical return period of around 50 years. This has secured them with a three year layer of retrocession cover at what Munich Re says was an attractive price.

The deal was marketed very quickly, just three days were required for it to be fully subscribed to by investors. Munich Re say the response from the market was very positive and the deal was substantially oversubscribed. This continues a trend of growing investor appetite for insurance-linked securities and the size of the market as it is right now being unable to satisfy all of them. Queen Street III placed the bond with a broadly diversified, global group of investors including investment funds, hedge funds, insurers and reinsurers.

The bond pays a 4.75% risk premium (lower than was initially hoped for we understand) but investors will also receive variable-rate interest from the U.S. Treasury bill fund set up by Munich Re subsidiary MEAG. The $150m of notes received a ‘B+’ rating from Standard & Poor’s.

Munich Re board member Thomas Blunck said; “Catastrophe bonds are establishing themselves as a supplementary means of transferring risks. Munich Re is taking advantage of the favourable market environment for cat bonds to obtain cover for the peak risk ‘Storm Europe’. The market response shows the interest of specialised investors in the instrument of catastrophe bonds, with their very transparent risk.”

You can read all about the Queen Street III Capital Ltd. transaction in our catastrophe bond Deal Directory.

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