Swiss Re Insurance-Linked Fund Management

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Swiss Re sponsoring its fifth Matterhorn Re cat bond of 2020


Global reinsurance firm Swiss Re has returned to the catastrophe bond market for what will be its fifth transaction of 2020 and its sixth in total under the Matterhorn Re program, with a $150 million U.S. named storm focused Matterhorn Re Ltd. (Series 2020-5) deal.

matterhornSwiss Re launched the Matterhorn Re catastrophe bond program at the mid-point of 2019 and since then has sponsored $1.31 billion of these bonds and with this latest deal looks set to take its cat bond supported collateralized catastrophe retrocessional reinsurance to nearer $1.5 billion.

Interestingly, Swiss Re has become the first sponsor of catastrophe bonds to have five issuances in a single calendar year, with this never being seen before in the over 700 transactions and almost 24 years that we’ve been tracking the catastrophe bond market’s development through our Deal Directory.

The only other issuers with a fifth series in a single year are private cat bond platforms, whose deals will not all have been from the same sponsor.

So Swiss Re has shown a considerable commitment to the catastrophe bond market and leveraging insurance-linked securities (ILS) fund and investor capital to support its expansive appetite for property catastrophe risks.

For this latest and fifth deal of 2020, we’re told that Matterhorn Re Ltd., a Bermuda based special purpose insurer, will look to issue two tranches of Series 2020-5 cat bond notes that 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 losses with this Matterhorn Re 2020-5 cat bond deal.

The protection will be across a two year period to the end of November 2022 (so covering two U.S. hurricane seasons) on a per-occurrence basis, using weighted industry loss index triggers, we understand.

The two tranches differ slightly in terms of regions covered, making one slightly riskier than the other due to the inclusion of southern and Gulf Coast states, plus Florida.

Matterhorn Re Ltd. will issue an at least $75 million Series 2020-5 Class A tranche of notes that we’re told will cover northeast U.S. named storm risks, with these notes having an initial expected loss of 2.4% and being offered to investors with coupon price guidance in a range from 4.5% to 5%.

The SPI will also issue an at least $75 million Series 2020-5 Class B tranche of notes, which we’re told are the slightly riskier due to having a broader coverage area that includes the east coast, Florida, certain Gulf Coast states and also Puerto Rico. This tranche of notes have an initial expected loss of 2.4% and are being offered to investors with price guidance in a range from 5.75% to 6.25%, we understand.

Swiss Re’s use and management of third-party capital within and to support its reinsurance business continues to expand, with the company having around $2.5 billion of managed capital and then this additional now set to approach $1.5 billion of third-party capital supporting its retrocession through catastrophe bonds.

Swiss Re clearly recognises the significant value that the capital markets offer to its business model, both in terms of utilising investor capital within its underwriting through its reinsurance sidecar investment vehicles, as well as for hedging purposes through these catastrophe bonds.

We’ll update you as this Matterhorn Re Ltd. (Series 2020-5) catastrophe bond from Swiss Re comes to market and you can read about every cat bond Swiss Re has ever sponsored in our comprehensive cat bond and related ILS Deal Directory.

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