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Munich Re: Queen Street X Re 2015 cat bond “well received”


Global reinsurance giant Munich Re has announced the completion of its latest catastrophe bond transaction, Queen Street X Re Limited (2015), which remained at its $100m launch size and was well received by investors, the reinsurer said.

The deal, which is comparable to the reinsurers previous Queen Street bonds, launched roughly two weeks ago targeting a rapid completion, which it achieved, ensuring it counts towards first-quarter 2015 issuance figures.

The Queen Street X Re 2015 cat bond provides Munich Re with a source of collateralized retrocessional reinsurance for losses from U.S. hurricane and Australian cyclone risks with a statistical return period of between 65 and 100 years per event.

The coverage the completed transaction provides is on a per-occurrence basis. The triggers used are for U.S. hurricanes an industry loss trigger, which will be quantified on the basis of weighted market losses by region and line-of-business as reported by PCS (Property Claim Services), and Australian cyclones using a modelled loss trigger calculated by AIR Worldwide.

The German-based reinsurer attempted to finalise a similar deal in 2014 that was subsequently withdrawn from the space, as market feedback pointed towards aggressive pricing and a lack of investor appetite for the deal.

Improving on last year then, Munich Re “has once again used a catastrophe bond to efficiently cover our single peak exposures such as US hurricane and Australian cyclone,” said Munich Re Board Member, Thomas Blunck.

Adding; “The current market environment allowed for attractive risk spreads for investors, which at the same time made the risk transfer valuable for us. The bond has been well received by the market.”

The single tranche of $100m of notes issued by Munich Re is exposed to U.S. hurricanes using an industry loss trigger and Australian cyclones using a modelled loss trigger, on a per-occurrence basis.

The deal launched with an initial price guidance of 5.5% to 6% and priced right at the mid-point (5.75%), providing investors with a multiple of 2.26 times the base expected loss.

This falls in line with 2015 first-quarter issuance; of which the average multiple is 2.55 times the base expected loss.

Interestingly, had Munich Re’s previous Queen Street X Re deal not been withdrawn and had priced at the mid-point of guidance, investors would have been provided with a multiple of less than 2 times the expected loss, highlighting the greater appeal for investors this time around.

Munich Re said that as evidenced by the better reception for this latest Queen Street X Re cat bond, the deal was “placed globally among a broadly diversified group of international investors.”

Risk modelling for the transaction was completed by AIR Worldwide, while Deutsche Bank Securities acted as sole bookrunner and Munich Re acted as the sole structurer and arranger for the deal.

Further information on the $100m Queen Street X Re Limited (2015) catastrophe bond is available in the Artemis Deal Directory.

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