German domestic market insurance company Versicherungskammer Bayern Versicherungsanstalt des oeffentlichen Rechts’ (VKB) has entered the catastrophe bond market for the first time, seeking €150 million in multi-peril reinsurance from the capital markets through a King Max Re DAC 2023 transaction.
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.
Ceding company VKB Re, or Versicherungskammer Bayern Konzern-Rückversicherung Aktiengesellschaft, is a subsidiary of the VKB group, acting as an internal reinsurer and pooling certain of the group’s risks, making it an ideal company to front the capital markets.
We’re told that VKB is seeking €150 million in multi-peril reinsurance on a collateralized basis with this first King Max Re 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 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.
It’s a straightforward indemnity arrangement, but interesting to see a German sponsor coming to market this year and not one of the large reinsurance firms based there.
Another first time sponsor is also encouraging, while the spreads available will provide some price signals for the European reinsurance renewals at 1/1.
You can read all about this King Max Re DAC 2023 catastrophe bond transaction to our Deal Directory, where you can analyse details of almost every cat bond ever issued.
View all of our Artemis Live video interviews and subscribe to our podcast.
All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.
Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.
