Global reinsurance giant Munich Re has now completed the issuance of a first set of notes from its fully collateralized reinsurance sidecar vehicle Eden Re II Ltd. for this January renewal season, with a $55.1 million tranche of Series 2021-1 notes sold to investors.
Munich Re’s collateralized reinsurance sidecar is a regular feature of the January reinsurance renewals, with the company now having used a sidecar named Eden Re since 2014.
Munich Re has been accessing the capital markets for retrocessional reinsurance protection and sharing its underwriting returns with ILS investors through its Eden Re series of collateralised sidecar vehicles since 2014, with every transaction it has sponsored detailed in our Reinsurance Sidecar Transaction Directory.
In recent years, two tranches of notes have been issued by the Eden Re II special purpose insurer (SPI), which is domiciled in Bermuda, one in December and then a second, typically larger tranche of notes in January.
True to form, the first tranche of reinsurance sidecar notes to emerge from Munich Re for 2021 is a $55.1 million tranche of Series 2021-1 Class A notes.
That’s slightly larger than the 2020-1 Class A notes from a year ago, which were $54.6 million in size.
Munich Re’s fully collateralised reinsurance sidecars have become an important feature of the companies retrocessional arrangements, while also enabling it to share the risks and returns of its underwriting with third-party investors and earn fee income in the process.
Special purpose insurer (SPI) Eden Re II Ltd. has issued this $55.1 million tranche of sidecar notes for 2021, with the Series 2021-1 Class A participating notes due for maturity as of March 21st 2025.
The notes have been issued on behalf of a single 2021-1 segregated account of Eden Re II Ltd. and have been sold to qualified institutional investors, with the collateral used to support a retrocessional reinsurance agreement, likely a property catastrophe quota share, between Munich Re and Eden Re II.
It’s expected that Munich Re will also sponsor a larger issuance of notes from the Eden Re II reinsurance sidecar vehicle for the renewals as well, especially as investor appetite for access to reinsurance linked returns is on the rise, alongside market pricing.
In addition, it’s expected that Munich Re will also return with another Leo Re sidecar issuance, specifically for Dutch pension investor PGGM for who this is a dedicated, sidecar of one structure.
Global reinsurers, like Munich Re, continue to look to the capital markets and the collateralised reinsurance sidecar vehicle as a route to access efficient capital.
These quota share arrangements provide capital that helps to drive growth and also moderate PML’s, while providing attractive fee income opportunities and enabling the reinsurer to better manage its exposures, particularly in property catastrophe risks, by sharing in the risks and returns of its portfolio with capital market investors.
At this point in a hardening market cycle, where Munich Re has specifically said it would target growth in its property reinsurance book, sidecars of the largest players in the market are likely to see rising demand from investors.
For more details on reinsurance sidecar investments and transactions view our list of collateralized reinsurance sidecars transactions.