Munich Re has established a new Caymans Island SPV called Shore Re Ltd. which will be used to issue a $100m catastrophe bond on behalf of a Massachusetts state wind insurance pool. The Massachusetts Property Insurance Underwriting Association (MPIUA) has been reinsured by Munich Re America for a portion of their hurricane risks and they in turn are seeking to hedge the ceded risk with the capital markets.
The three year deal will feature an indemnity trigger and will provide protection against windstorm losses on a per-occurrence basis. Covered losses will not have any link to Munich Re’s loss experience in the area, rather they will cover the actual paid losses experienced by members of the MPIUA.
GC Securities are sole bookrunner for this transaction. GC Securities and Munich Re are co-lead managers. AIR Worldwide are providing risk modelling services.
The two tranches of notes will cover different levels of loss. Class A will cover losses between an attachment level of $600m and an exhaustion level of $900m. Class B will cover losses between an attachment level of $900m and an exhaustion level of $1.20B. Standard & Poor’s have rated the tranches ‘BB’ and ‘BB+’. The collateral for this deal will be invested in highly rated Treasury money market funds.
There is a chance that this deal could grow beyond the $100m preliminary volume depending on investor appetite. The deal is expected to close around the 1st July and we’ll keep our catastrophe bond Deal Directory up to date with any additional information.