Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

New Queen Street VIII Re catastrophe bond includes Australian peril


Munich Re, the world’s largest reinsurance company, is bringing another of its Queen Street catastrophe bond deals to market, according to our sources, in Queen Street VIII Re Limited.  The eighth Queen Street cat bond includes what is sure to be seen as a diversification opportunity of sorts for investors, some rare (to the cat bond market) Australian cyclone risk.

Munich Re is one of the more prolific sponsors of catastrophe bond transactions, this is its eighth deal issued under a Queen Street branded vehicle and the sixteenth entry in our Deal Directory with Munich Re listed as a cat bond or insurance-linked securitization sponsor or cedent.

Queen Street VIII Re Limited is a recently registered Bermuda domiciled special purpose insurer which will issue a single tranche of catastrophe bond notes. The sale of the notes will provide a source of fully-collateralized, retrocessional reinsurance protection to Munich Re for the perils of U.S. hurricanes and Australian cyclones. We’re told that the deal is being marketed with a suggested size of $75m, but clearly given the appetite for new cat bond issues that could grow.

We understand that the coverage provide by Queen Street VIII Re will be on a per-occurrence basis over three years and that both perils will use a type of industry loss index trigger. The trigger for U.S. hurricane risks is a county and line of business weighted PCS industry loss index, while the trigger for Australian cyclone risks is a weighted modelled industry loss index.

We’re told that the attachment probability for the notes is 3.91%, the exhaustion probability is 1.88% and the expected loss is 2.72%. The expected coupon price guidance range is from 6.75% to 7.5%.

Munich Re is arranging and structuring this deal itself while GC Securities is the bookrunner on the transaction. AIR Worldwide are risk modeller.

This deal offers an interesting diversifier in the Australian cyclone risk, although as it is bundled with U.S. hurricane the diversification effects for investors are diluted somewhat. However it should prove popular as we have not seen a transaction containing Australian cyclone risks in the cat bond market since mid-2011 with the Sector Re deal from Swiss Re.

That’s all we have on Queen Street VIII Re Ltd. for the moment, we hope to bring you more details as the transaction comes to market. The deal has been added to our Deal Directory and we will update you as more information becomes available.

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