Munich Re lists $54.6m Eden Re sidecar tranche, preps Leo Re renewal for PGGM

Global reinsurance firm Munich Re is in the midst of issuing its collateralised reinsurance sidecar arrangements for 2020, with the first $54.6 million tranche of Eden Re II Ltd. Series 2020-1 notes and the first slice of a Leo Re Ltd. 2020-1 private sidecar arrangement for Dutch pension fund investor PGGM.

Munich Re’s fully collateralised reinsurance sidecars have become an important feature of the companies retrocessional arrangements, while also enabling it to share risks and returns of its underwriting with third-party investors and get paid fee income in the process.

Munich Re has been accessing the capital markets for retrocessional reinsurance protection and sharing its underwriting returns with ILS investors through its Eden Re named collateralised sidecar vehicles since 2014,  with all transactions it has sponsored detailed in our Reinsurance Sidecar Transaction Directory.

For 2020, the first tranche of Eden Re II Ltd. sidecar notes are $54.6 million in size, an Eden Re II Ltd. Series 2020-1 Class A tranche of notes due March 22nd 2024.

That’s smaller than the first tranche Munich Re sponsored through Eden Re II a year ago, with the 2019-1 Class A tranche having been $86.8 million in size.

Last year Munich Re followed that up with a $213.3 million tranche of Series 2019-1 Class B participating notes, taking the total to around $300 million again for Eden Re 2019.

So we expected Munich Re will return to the market with another tranche of 2020-1 Class B notes issued on behalf of an Eden Re II Segregated Account in the coming days.

The Eden Re transactions tend to feature property catastrophe reinsurance and retrocession risks.

Separately, Munich Re is continuing its relationship with experienced insurance-linked securities (ILS) investor and Dutch pension fund manager PGGM, using its Leo Re Ltd. private sidecar vehicle.

The Leo Re Ltd. private sidecar arrangement is a property catastrophe reinsurance vehicle sponsored by Munich Re and backed solely funded by PGGM on behalf of the PFZW pension fund, one of the pensions it manages.

This gives PGGM a slice of Munich Re’s underwriting book risks and returns and Munich Re benefits from a relationship with the largest single investor in ILS in return.

PGGM first used the Leo Re special purpose insurer (SPI) to arrange a private quota share or sidecar transaction with Munich Re for 2017, when a $200 million sidecar arrangement was issued.

The pension fund manager then doubled the size of the arrangement for 2018, backing Munich Re’s underwriting to the tune of $400 million, through a $260 million Class A tranche and $140 million Class B tranche of notes.

Then, a year ago in 2019, we saw the first $20 million tranche of Series 2019-1 Class A notes issued by Leo Re back in December, which was followed up by a $380 million Class B tranche, taking the total to $400 million again last year.

For 2020, the Leo Re Ltd. private sidecar has issued a single $630,000 tranche of Series 2020-1 Class A notes. We understand a much larger second tranche will be issued in the coming days as well.

These notes are due March 22nd 2024, the same date as the Eden Re 2020 sidecar issuance.

Both the Eden Re II and the Leo Re 2020-1 tranches have been listed on the Bermuda Stock Exchange (BSX).

We suspect the second tranches will be much larger for both vehicles, but it will be interesting to see whether Munich Re reinsurance sidecars come close to the $700 million of notes issued across Eden Re II and Leo Re a year ago.

For more details on reinsurance sidecar investments and transactions view our list of collateralized reinsurance sidecars transactions.