Swiss Re Insurance-Linked Fund Management

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Shore Re Ltd. catastrophe bond providing protection to Massachusetts completes


Both Munich Re and GC Securities have announced the completion of the expected Shore Re Ltd. windstorm catastrophe bond which they have been assisting the Massachusetts Property Insurance Underwriting Association (MPIUA) with.

The transaction was originally (as we wrote here) supposed to consist of two tranches of cover but it actually completed as a single tranche cat bond valued at $96m. Ultimately the deal provides the MPIUA with $96m of fully collateralized per-occurrence cover against Massachusetts hurricane risk. The cat bond will use an indemnity trigger based on the actual loss experience of the MPIUA in the event of a qualifying windstorm.

The single tranche of Class A notes has been rated ‘BB’ by Standard & Poor’s and is expected to mature in July 2013.

Below we feature some quotes from those involved in the transaction:

Tony Kuczinski, President and CEO of Munich Reinsurance America
“With the Shore Re transaction we have been able to provide our US clients with a capital markets transaction for the second time within two months. Munich Re offers its clients the full spectrum of risk transfer solutions from traditional reinsurance to capital market solutions. The capital markets constitute a good complementary risk carrier for specialized peak risks like Massachusetts hurricane”.

Cory Anger, Global Head of ILS Structuring, GC Securities
“This transaction brings a new sponsor to the ILS space and incorporates structural advances achieved in other GC Securities transactions to optimize the performance of Shore Re throughout its three-year risk period and make the structure more comparable to traditional reinsurance.”

Chi Hum, Global Head of Distribution, GC Securities
“On Shore Re Ltd, investors welcomed the opportunity to access Massachusetts-only wind risk on a standalone basis, and support a first-time catastrophe bond sponsor. This support was evidenced by an oversubscribed book, notwithstanding USD2 billion of preceding U.S. wind exposed issuance during the 2010 calendar year.”

David Priebe, Chairman of Global Client Development, Guy Carpenter
“This is a great example of the benefits of a fully coordinated effort – in this case, between the MPIUA, GC Securities, Guy Carpenter’s broking team and Munich Re – resulting in a fully integrated multi-year cat bond layer delivered in coordination and optimized within the context of the MPIUA’s entire capacity purchase program.”

Jack Golembeski, President, MPIUA
“MPIUA’s objectives in pursuing a catastrophe bond were clearly attained through this transaction. Our goals included filling MPIUA’s entire reinsurance program with a combination of traditional reinsurance and catastrophe bond-based reinsurance, assuming the cat bond pricing proved to be comparable to traditional reinsurance rates, and securing price stability for a portion of MPIUA’s reinsurance program over a three year period. By developing relationships with the investor marketplace, MPIUA is equipped with broader capabilities to fulfill our reinsurance needs into the future.”

Full details of the transaction are as always available in the Artemis catastrophe bond Deal Directory.

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