Global reinsurance firm Munich Re looks set to be successful with its latest catastrophe bond issue, as the still $100m Queen Street X Re Limited (2015) cat bond has been priced at the mid-point of initial guidance.
This cat bond is Munich Re’s second attempt to secure a source of retrocessional reinsurance protection for U.S. hurricane and Australian cyclone risks in the last year, however its prior attempt failed due to the pricing reportedly being thought too keen for investors tastes.
This Queen Street X Re 2015 cat bond has been priced accordingly and launched to investors with coupon guidance of 5.5% to 6%, which for a cat bond with an expected loss of 2.54% (2.72% on a WSST basis), was aligned with recent successful issuances.
The deal has not upsized we’re told, remaining as a single $100m tranche of notes that will be exposed on a per-occurrence basis to U.S. hurricanes using an industry loss trigger and Australian cyclones using a modelled loss trigger.
We understand that the deal has now been priced at 5.75%, so right on the mid-point of guidance, which will provide investors a multiple of 2.25 times the base expected loss, or 2.11 times the sensitivity case.
Once again that seems aligned with transactions that have recently completed in the ILS market, where investors have tended to demand a multiple of slightly above 2 times the expected loss to take on catastrophe risks.
Munich Re will be delighted to see this deal successfully complete and that ILS investors have shown support for its risk transfer needs once again.