Swiss Re Insurance-Linked Fund Management

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Munich Re’s Queen Street XII Re cat bond could be its biggest ever


Reinsurance firm Munich Re’s Queen Street XII Re dac 2016 catastrophe bond transaction could as much as double in size, with the company raising its target to $150m to $200m for the bond, while at the same time price guidance has been lowered.

The Queen Street XII Re 2016 cat bond from Munich Re launched almost ten days ago, with the reinsurance firm looking for a new source of collateralised retrocession for certain U.S. hurricane and European windstorm risks.

The deal launched with Munich Re seeking $100m of retrocessional reinsurance to cover industry losses from the two covered perils on a per-occurrence basis over four seasonal risk periods for each peril.

Featuring industry loss triggers from PCS, a county and line of business-weighted index for U.S. hurricane risks, and PERILS AG, a Cresta zone weighted index for European windstorm risks, the deal is now being marketed with a target size of $150m to $200m, we’re told, suggesting Munich Re will at least double the coverage that the just matured Queen Street VII Re Ltd cat bond transaction (for which this is a near replacement) provided.

In fact, if Queen Street XII Re 2016 hits the upper end of the target range, at $200m, it will actually be the largest catastrophe bond Munich Re has ever been the primary sponsor of, according to the 400+ cat bonds listed since 1997 in our Deal Directory.

That’s a stunning fact, for one of the very largest reinsurance groups in the world to potentially be sponsoring its largest ever cat bond right now demonstrates the attractive source of capacity the ILS market can now provide to very large ceding companies.

At the same time as the target size has been updated, the price guidance for this Queen Street XII Re 2016 cat bond has been lowered to below the initial guidance.

The single tranche of notes to be issued launched with coupon guidance of 5.75% to 6.25%, but that range has now been reduced to 5.25% to 5.75% sources said, suggesting that the pricing will be at or below the initial expectations for Munich Re.

With the notes having an initial 2.71% expected loss, that suggests a multiple of 2.1 times at the top end of revised pricing, or lower, which would be a multiple of 1.8 times at the WSST EL of 2.9%.

This cat bond issuance is scheduled to be priced before the end of this week and completed next week. We’ll update you when the final size of the transaction is known.

You can read all about the Queen Street XII Re dac cat bond and every other transaction in the Artemis Deal Directory.

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