Reinsurance firm Swiss Re has now successfully secured $255 million of hurricane and mortality risk retrocessional protection with its latest Matterhorn Re Ltd. (Series 2020-2) catastrophe bond transaction.
This transaction was launched recently to investors and settled yesterday, as Swiss Re continues to put third-party capital at the heart of its business and retro protections.
The $255 million Matterhorn Re 2020-2 is now the third catastrophe bond that Swiss Re has sponsored under the program vehicle and already its second issuance of this year.
For this Matterhorn Re cat bond, Swiss Re added protection for extreme mortality risks to the catastrophe cover it has secured through the program in the past.
When this new cat bond launched Swiss Re was seeking up to $275 million of coverage against losses from U.S. named storms and also extreme mortality risks.
Swiss Re’s special purpose insurance vehicle Matterhorn Re Ltd. has now issued and sold two tranches of Series 2020-2 notes to investors, the proceeds of which will be used to collateralise underlying retro reinsurance agreements between Matterhorn Re Ltd. and Swiss Re.
Originally the deal targeted between $200 million and $275 million of limit protection across the two tranches, through a Class A offering of $75 million to $100 million of notes exposed to losses from both northeast U.S. named storms and also extreme mortality events in Australia, Canada and the UK, plus a Class B tranche that targeted $125 million to $175 million of protection for Swiss Re and will cover losses from U.S. named storms across the U.S. coastline from Texas to Maine.
At close, the Class A tranche (named storm and mortality risks) settled at $80 million in size, while the Class B named storm only tranche settled at the upper end of targets at $175 million, so combined offering a total of $255 million of protection.
The Class A tranche of notes, which have an initial expected loss of 1.41% base for the northeast U.S. named storm risks and 0.98% for the Australian, Canadian and UK mortality risks, were priced at at 5%, towards the lower end of guidance, we understand.
While the Class B notes, with an expected loss at the base case of 2.76% base, have priced at 6.5%, we believe, the lower-end of initial guidance.
We understand the Class A tranche will cover Swiss Re until the end of 2023, so almost four years, while the Class B notes are on-risk only until just after the end of the November 2021, so covering two U.S. hurricane seasons.
Now completed Swiss Re has $855 million of retrocessional reinsurance protection in-force from the Matterhorn Re catastrophe bond program.
Alongside the recent expansion of Swiss Re’s Sector Re sidecar, this increased and expanding use of the catastrophe bond market has enabled Swiss Re to pull more third-party capital into its business model, in support of its expansive front-end underwriting appetite.
You can read all about this latest Matterhorn Re Ltd. (Series 2020-1) cat bond transaction and details on more than 650 catastrophe bond and related insurance-linked securities (ILS) transactions in the Artemis Deal Directory.