Global reinsurance firm Swiss Re is back in the catastrophe bond market for its first issuance under the Matterhorn Re program of 2021, with a target to secure $150 million or more of catastrophe retrocession through a Matterhorn Re Ltd. (Series 2021-1) transaction, this publication has learned.
Swiss Re could perhaps be considered to have been surprisingly quiet in the catastrophe bond issuance market in 2021, after having sponsored a record five deals in 2020.
But, with market conditions significantly improved and catastrophe reinsurance pricing also up, the fact it had already secured significant retro from the cat bond market and then found reinsurance price conditions conducive to retaining a little more risk through this year, is actually not that surprising.
So, it’s good to see the giant reinsurance firm back in the market, looking to secure $150 million or more of industry loss based retrocession for two of its peak catastrophe exposures, US hurricane and earthquake risk.
For this latest and seventh Matterhorn Re cat bond, Swiss Re is looking for a multi-year source of collateralized multi-peril retrocessional reinsurance protection, to protect it against losses from these perils on an industry loss basis.
We’re told that Matterhorn Re Ltd., a Bermuda based special purpose insurer, will look to issue a single $150 million or larger tranche of Series 2021-1 Class A cat bond notes, which will be sold to investors and the proceeds used to collateralise retrocessional reinsurance agreements between the SPI and sponsor Swiss Re.
In total, Swiss Re is seeking at least $150 million of collateralized retrocessional reinsurance against certain U.S. named storm and U.S. and Canadian earthquake losses with this Matterhorn Re 2021-1 cat bond deal. We’re told the U.S. named storm protection runs all the way from Texas around to the Northeast
The protection from the 2021-1 cat bond notes issued by Matterhorn Re will run across a roughly four year period, to early December 2025, so covers four U.S. hurricane seasons. The protection will be triggered on a per-occurrence basis, using weighted industry loss index triggers from PCS, we understand.
The $150 million of Series 2021-1 Class A notes come with an initial attachment probability of 4.29%, a combined expected loss of 3.32% and are being offered to cat bond investors with pricing in a range from 5.25% to 5.75%, sources said.
Named storm risk seems to be the larger peril contributor to the overall expected loss of these cat bond notes, we’re told.
Swiss Re has so far secured $1.61 billion of retrocessional reinsurance from six Matterhorn Re catastrophe bonds, largely focused on property catastrophe risks, but with one of the deals also including an element of extreme mortality protection.
Swiss Re has always been one of the most prolific sponsors of catastrophe bonds since the market began and currently sits at sixth place in our leaderboard of outstanding cat bond sponsors.