Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Munich Re brings Queen Street V Re Ltd. cat bond to market


German reinsurance firm Munich Re is returning to the insurance-linked securities market with another transaction in their Queen Street series of catastrophe bond transactions. Munich Re are a regular participant in the ILS and cat bond markets, and this latest cat bond will be their fifth Queen Street deal, but we actually have Munich Re listed as sponsors of twelve transactions in our Deal Directory. This fifth deal is being issued through Queen Street V Re Ltd., a Bermuda domiciled SPV established for this transaction.

Munich Re have chosen Bermuda as the domicile for their latest Queen Street cat bond SPV, having domiciled the last three in Dublin, Ireland. The notes of the previous deals have usually been listed on the BSX but the issuing entity has tended to be Irish. We’re unsure why the change in this Queen Street V Re Ltd. deal but Bermuda will no doubt be pleased to have attracted another cat bond SPV to the island.

Queen Street V Re Ltd. is seeking to issue $75m of catastrophe bond notes which will be exposed to U.S. hurricanes and European windstorms. U.S. north Atlantic hurricanes in certain States will be covered from April 2012 to March 2015 (three hurricane seasons), while European windstorm coverage in specified European countries will be from October 2012 and March 2015 (three European windstorm seasons). The three years of fully collateralized cat bond cover will give Munich Re industry loss based retrocessional protection on a per-occurrence basis for these two peak perils.

The index based industry-loss cover will be triggered based on indices from Property Claims Services (PCS) for U.S. hurricane risks and PERILS AG for European windstorm cover. AIR Worldwide provide risk modelling services. Following a qualifying event, AIR will calculate an index value against which a triggering event will be determined. The notes provide protection to Munich Re for U.S. hurricane losses above an index value of 104,000, up to 136,000 and Europe windstorm losses above an index value of 16,400 up to an index value of 19,925 (both on a per-occurrence basis). For U.S. hurricanes, county level PCS industry loss data and predetermined payout factors by county and line of business will be used to determine the index value. For European windstorm events industry loss data reported by PERILS and CRESTA Zone level predetermined payout factors will be used.

Proceeds from the sale of the notes issued by Queen Street V Re Ltd. will be invested in pre-selected U.S. Treasury money market funds rated ‘AAAm’.

Ratings agency Standard & Poor’s have assigned a preliminary credit rating of ‘B+’ to the single $75m tranche of Queen Street V Re notes.

There’s a good chance that this deal could be upsized before close and we’ll update you as it comes to market. More details on the transaction specifics are available in our catastrophe bond Deal Directory.

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