Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Swiss Re back with $175m Matterhorn Re 2020 named storm cat bond


Global reinsurance giant Swiss Re has returned to the catastrophe bond market and is seeking to sponsor its second Matterhorn Re catastrophe bond in six months, as it looks to secure at least $175 million of retrocession against U.S. named storm losses.

matterhornThe twin tranche Matterhorn Re Ltd. (Series 2020-1) catastrophe bond transaction sees Swiss Re continuing its recently accelerated use of the capital markets as source of capacity and retrocession to support its continued expansion into global peak property catastrophe risks.

Swiss Re returned to the cat bond market following a number of years’ hiatus with its first Matterhorn Re deal in June, securing a $250 million source of collateralized retro reinsurance covering certain losses from northeast U.S. named storms with the Matterhorn Re Ltd. (Series 2019-1) deal.

Now, the reinsurance company has returned to expand on its cat bond backed retrocession, with a deal that will provide coverage across two more hurricane seasons, designed to protect Swiss Re against the impacts of the largest storms, we have learned.

Bermuda based SPI Matterhorn Re Ltd. will issue two tranches of Series 2020-1 notes we’re told, with each covering a different layer of risk for Swiss Re.

These notes will be sold to cat bond investors and the proceeds used as collateral to back retrocessional reinsurance agreements between the issuer Matterhorn Re and sponsor Swiss Re.

The coverage will be for U.S. named storm losses (we’re not sure if this is a region specific coverage, or full U.S. named storm at this stage), on a weighted industry loss and per-occurrence basis, we understand, with coverage across two full wind seasons or approximately two years.

The first tranche of Series 2020-1 Class A notes is targeting $100 million of protection for Swiss Re, we’re told, with these notes having an initial expected loss of 2.82% and being offered to investors with coupon guidance in a range from 5.5% to 6%.

The second tranche of Series 2020-1 Class B notes is targeting $75 million of coverage, with an initial expected loss of 3.6% and coupon price guidance of 8% to 8.75%.

For Swiss Re, this transaction marks a further expansion of its capital markets backed retrocession at a time when it is embracing the capital markets more fully, to support its own catastrophe book.

These Matterhorn Re cat bonds can help the reinsurer to control the volatility it may face in hurricane exposed regions of the U.S. should major storms make landfall and cause significant industry losses.

That’s all we have for now on Swiss Re’s new Matterhorn Re Ltd. (Series 2020-1) catastrophe bond issuance. We understand that issuance will be in January, so falling into Q1 2020 figures.

You can read all about this latest transaction and every other catastrophe bond in the Artemis Deal Directory.

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