Munich Re redeems another tranche of Eden Re sidecar notes early


Reinsurance giant Munich Re has redeemed another tranche of notes from its Eden Re series of collateralized reinsurance sidecar issuances early, which may again be related to the loss activity of 2017’s hurricanes and other catastrophe events.

Munich Re’s Eden Re sidecar series was hit by the catastrophe events of 2017, with investors in the notes taking a share of losses from the reinsurer and leading to three tranches of sidecar notes being redeemed early, before their scheduled maturities.

We’re told that the early redemptions have all been related to the loss activity of last year, with commutation of underlying retrocession contracts and restructuring of remaining coverage cited as a reason.

In early December 2017, Munich Re had redeemed two classes of notes from its $290 million Eden Re II Series 2015-1 collateralized reinsurance sidecar early, which we’re told took a share of the reinsurers losses from recent major catastrophes around the world.

Then later that same month, Munich Re made a second early redemption of its sidecar notes, redeeming the $75.578 million Class A tranche of the Eden Re II Series 2016-1 collateralized sidecar vehicle.

It should be noted that these early redemptions are not because the sidecar tranches have been exhausted, we believe, but rather because having taken some losses and been eroded to a degree, their commutation and redemption becomes a more attractive option, making this more of a restructuring of the outstanding sidecar notes.

Now, Munich Re has also redeemed the remaining tranche of notes from the 2016 Eden Re II sidecar issuance.

This second tranche issued in 2016 by Eden Re II Ltd., was a $284.422 million Class B tranche of Section 4(a)(2) notes which had been offered as part of a private placement to the investors in Munich Re’s earlier sidecar offerings, we understand. This tranche had been due April 23rd 2019, but have now been redeemed early.

The Class B notes covered a 19.75% share of Munich Re’s first retrocessional reinsurance layer and a 7.1% share of the second, hence they would always have been expected to suffer some level of losses from the 2017 catastrophe events.

The early redemption means Munich Re can restructure its sidecar arrangements and sometimes such actions herald a fresh sidecar issuance said to be on the horizon, so it is possible that Munich Re is looking for more coverage.

Although Munich Re’s reinsurance sidecars have all been issued around the January renewals in the past, so a shift to a mid-year would be unusual. But having lost some of its coverage due to the erosion of sidecars by 2017 catastrophes it is always possible the reinsurer looks to tap the capital markets again. We’ll let you know should we see a fresh Eden sidecar issuance.

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

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