Swiss Re Insurance-Linked Fund Management

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Swiss Re seeking $150m Matterhorn Re US wind cat bond


Global reinsurance giant Swiss Re has returned to the catastrophe bond market in search of per-occurrence US hurricane protection, seeking to secure a $150 million slice of retrocession through a new Matterhorn Re Ltd. (Series 2022-2) issuance, Artemis has learned.

Swiss Re Matterhorn Re catastrophe bondsFor its latest Matterhorn Re catastrophe bond, Swiss Re appears to be testing the appetite of catastrophe bond investors for three layers of similar risk, but structured in different ways, sources told us.

Given the widened spreads and higher pricing in the catastrophe bond market, which has follower broader reinsurance markets in hardening, this approach of trying out the response of cat bond investors to a number of layers of risk structured in different ways could actually be a good approach to find the optimal way to place risk at this time.

This will be Swiss Re’s second full Matterhorn Re Ltd. catastrophe bond issuance of 2022, but its third use of the structure this year as the vehicle was also used to privately place a slice of the reinsurers recent innovative stop-loss deal.

Overall, this will be the tenth insurance-linked securities issuance under the Matterhorn Re cat bond program vehicle since it was launched in 2019 that we have covered.

Details of every Matterhorn Re cat bond and every other cat bond sponsored by Swiss Re can be found in our Deal Directory.

With its latest Matterhorn Re catastrophe bond, Swiss Re is looking to secure per-occurrence based retrocessional reinsurance protection against certain losses from US named storms, so tropical storms and hurricanes, on an industry loss trigger basis.

The hurricane coverage will span the entire hurricane exposed coastline of the United States, so from the Gulf Coast, including Florida, up the eastern seaboard and also islands such as Puerto Rico.

Matterhorn Re Ltd., Swiss Re’s Bermuda based special purpose insurer, is seeking to issue $150 million or more of notes across a proposed three tranches of the Series 2022-2 cat bond, which will be sold to investors and the proceeds used to collateralise retrocessional reinsurance agreements between the SPI and sponsor Swiss Re.

Whether all three tranches get issued remains to be seen, as we’re told the risk levels are similar, although the structures different, perhaps suggesting the tranches with the best response from investors are the ones that will ultimately get placed.

All three tranches would provide the same per-occurrence and industry-loss trigger based retrocessional reinsurance protection against US named storm losses to Swiss Re.

We’re told none of the three tranches are sized, while one is zero-coupon structured and only has a short tenure, another having a coupon but being short tenure as well, and the other a multi-year tranche.

All three tranches of cat bond notes have the same expected loss of 3.31% at the base case and an attachment probability of 3.82%, we’re told.

The Class A tranche are zero coupon discount notes, which are priced at 90% to 90.5% of par, we understand, implying a rough coupon-equivalent of 19.5% to 20% and these have a term to December 2022, so only covering the coming hurricane season.

The Class B tranche are priced with a coupon of between 19% to 20.5%, we’re told, and also only have a term for one wind season to December 2022.

The final Class C tranche of notes are multi-year and priced with guidance of 9.5% to 10.25%, but their term would be until June 2024, so covering two wind seasons for Swiss Re if placed.

It’s an interesting approach, seemingly designed to test investor appetite between zero-coupon notes or bulleted bonds with a coupon that both run across a single wind season, versus a two year bullet bond with a coupon.

As a result, it will be intriguing to find out how this latest Matterhorn Re catastrophe bond from Swiss Re fares through the market, as it will provide a good guide for investor appetite for broad US wind risk with the hurricane season fast-approaching.

Before this latest Matterhorn cat bond issuance, Swiss Re stood at tenth in our leaderboard of outstanding cat bond sponsors.

You can read all about this new catastrophe bond from Swiss Re, the Matterhorn Re Ltd. (Series 2022-2) transaction, and every other cat bond ever issued in the Artemis Deal Directory.

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