Munich Re’s latest catastrophe bond Queen Street VI Re Ltd. is getting closer to completion and we now have some more details on the expected size of the transaction and the pricing of the notes. Their sixth Queen Street cat bond, this latest deal see’s Munich Re looking for a fully collateralized source of reinsurance cover for the two peak perils of U.S. hurricane and European windstorm risks on an industry loss basis.
According to our market sources Queen Street VI Re is expected to complete at $100m, with a very slim chance it could go slightly higher. Interest in the transaction has been sufficiently high enough to achieve that sort of size, although as with any U.S. wind exposed transaction being marketed during the hurricane season it was never going to become a huge cat bond.
$100m is in line with the sort of levels of cover Munich Re has typically sourced from the cat bond market in the past. They have never sponsored a deal larger than $165m and that was back in 2001 with PRIME Capital Hurricane Ltd. Of their five previous Queen Street deals the largest was $150m and the smallest $75m, so somewhere close to $100m seems just about right for their typical capital market cover ambitions.
We’re told that the transaction is expected to price below the initial guidance range that was published. It was initially thought that the deal would price somewhere between 10.75% and 11.5% but sources have confirmed that the latest pricing guidance is for the deal to offer 10.35%. Munich Re will be pleased if this pricing is achieved as it will represent a small discount on the cost of the transaction to them, the lower than expected pricing also suggests demand for the cat bond and a willingness among investors to accept the risk for a slightly lower return.
The deal completes its marketing and is due to price today, 10th July and we’re told it will be fully completed in a weeks time. We’ll update you as it comes to market and you can read full details on Queen Street VI Re Ltd. in our catastrophe bond Deal Directory.