Global reinsurance firm Munich Re has now taken its Eden Re II Ltd. collateralised reinsurance sidecar vehicle to $285 million of issuance for 2020, with a second tranche coming to market yesterday.
Munich Re is a regular sponsor of reinsurance sidecars, with its Eden Re and Eden Re II vehicle having been well-established as syndicated quota share insurance-linked securities (ILS) vehicles, while its Leo Re vehicle achieves the same but in a private transaction with a single large investor.
For 2020, Munich Re began its sidecar issuances with Eden Re II Ltd. issuing a $54.6 million tranche of Series 2020-1 Class A notes, while at the same time the Leo Re Ltd. private sidecar issued a single $630,000 tranche of Series 2020-1 Class A notes.
The reinsurance firm followed up with a $399.37 million Class B tranche of notes from Leo Re Ltd., taking its private sidecar arrangement with Dutch pension investor PGGM to $400 million for 2020, the same size as the prior year.
Now, as expected, Munich Re has topped up its Eden Re II reinsurance sidecar for 2020 as well, with a $230.4 million Eden Re II Ltd. Series 2020-1 Class A tranche of notes that are due March 22nd 2024 issued by the vehicle.
The due date for the notes is the same as the Eden Re II Class A tranche and also the Leo Re 2020 private sidecar tranches of notes as well.
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.
The quota share sidecar arrangements 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.
For 2020, Munich Re’s Eden Re II sidecar is actually a little smaller than the prior year, totalling $285 million this year, which is down on 2019 and 2018’s $300 million issuances.
It’s not clear whether Munich Re faced any fundraising challenges. The sidecar investor base has been hurt in recent years, but we understand that Munich Re’s Eden Re vehicles have been among some of the better performers.
It’s encouraging though to see this giant global reinsurance firm persist with its use of the collateralised reinsurance sidecar vehicle.
Access to efficient capital through these quota share arrangements can provide attractive fees, while 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.
For details of many reinsurance sidecar investments and transactions over the history of the ILS market, view our comprehensive list of collateralized reinsurance sidecars transactions.