Swiss Re’s new Matterhorn Re cat bond upsizes 150% to $250m

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Reinsurance giant Swiss Re’s return to the catastrophe bond market has been highly successful, as its new Matterhorn Re Ltd. (Series 2019-1) deal has increased in size by 150% to become a $250 million issuance, while the notes pricing settled at the tight end of guidance, we can report.

matterhornSwiss Re returned to the catastrophe bond market in June after a number of year’s hiatus, returning with a new issuance vehicle named Matterhorn Re Ltd. to tap the capital markets to support its retrocessional reinsurance needs.

The Matterhorn Re 2019-1 cat bond deal is Swiss Re’s first natural catastrophe bond issuance in almost six years, which partly reflected the fact that other sources of retrocession have been more compelling to the firm, than the issuance of often time-consuming and costly cat bonds.

But in 2019 Swiss Re is back and demonstrating its commitment to trading with capital markets counterparties, with this upsizing showing that catastrophe bonds are firmly back on the retro menu for the reinsurer.

When the transaction launched, as we were first to reveal earlier this month, Swiss Re was seeking an issuance of $100 million of notes through its new Bermuda-based special purpose insurer (SPI) Matterhorn Re Ltd.

Matterhorn Re was set to issue a single $100 million tranche of Series 2019-1 notes, which were to be issued and sold to ILS investors and the proceeds used to collateralize a retrocessional reinsurance agreement between the SPI and Swiss Re.

The issuance is designed to provide Swiss Re with a source of collateralized retro reinsurance covering certain losses from northeast U.S. named storms, on an industry loss trigger and per-occurrence basis, across a risk period of roughly 18 months in order to cover two consecutive hurricane seasons for the reinsurer.

The notes, which have an initial one-year modelled expected loss of 1.92%, or 3.81% across the entire term, as well as Swiss Re’s return to the market, were clearly well-received by the ILS and cat bond investor-base, as the tranche of Series 2019-1 notes being issued by Matterhorn Re Ltd. has now grown in size by 150% turning this deal into a considerably larger $250 million offering.

At the same time, we’re told that the pricing on the notes settled at the tightest end of guidance.

The transaction has been structured and issued as a zero-coupon cat bond, hence it was marketed with price guidance of 90.5% to 91.5% of par value, which could be considered a coupon equivalent of 8.5% to 9.5%.

At pricing the notes were fixed at 91.5% of guidance, so a coupon equivalent of 8.5% across the full term of the cat bond deal.

For Swiss Re this will be a welcome result for its first catastrophe bond issuance in a number of years and for cat bond investors or ILS funds it will be welcome to see the reinsurer back in the market and showing its commitment through this enlarging of the transaction.

You can read all about this new $250 million Matterhorn Re Ltd. (Series 2019-1) catastrophe bond issuance from Swiss Re and every other cat bond deal in the Artemis Deal Directory.

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