Munich Re provides capital-markets solution for American Modern
Acting as sole arranger, Munich Re has locked in $75m of reinsurance capacity for one of its primary insurance subsidiaries through Queen City Re Ltd.
Munich. Munich Re successfully lead-structured Queen City Re Ltd., a Bermuda-registered special purpose insurer, in issuing a $75m cat bond transaction providing protection for American Modern Insurance Group, Inc., a wholly-owned indirect subsidiary of Munich Re.
The risk transfer is based on an indemnity, per-occurrence trigger and was modeled by AIR Worldwide. With manufactured housing, mortgage fire, lender-placed insurance and recreational products being part of the cat bond’s subject business, the transaction transferred an unprecedented mix of risks on an indemnity basis to the capital market, providing American Modern with three-year protection against US named storm events.
Manuel Z. Rios, President and CEO of American Modern, said: “This is the first time we have used a cat bond to provide risk capacity. We are pleased it was well received by the capital markets, which we see as a complement to traditional reinsurance coverage.”
Despite American Modern being a first-time user of cat bonds with an unusual book of business, the current market environment allowed Munich Re to lock in an annual risk spread of 350 basis points for an initial expected loss of 0.57% per annum.
“We are pleased to have assisted our own subsidiary American Modern with this innovative and diversifying capital markets transaction. This is the fourth cat bond issue this year and complements Munich Re’s managing risks capabilities in a way that is beneficial for both sponsors and investors”, said Thomas Blunck, member of Munich Re’s Board of Management.
This press release is prepared for the purpose of public announcement of the insurance solution provided by Munich Re in connection with the issuance of the bonds referred to herein (the "Bonds") and does not constitute or form part of any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for any securities in any jurisdiction, nor shall it (or any part of it) or the fact of its distribution form the basis of, or be relied upon in connection with, or act as any inducement to enter into, any contract or commitment therefore.
All of the Bonds have been sold and this announcement is a matter of record only. The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or any state or foreign securities law and the issuer is not and will not be registered under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act").
The Bonds were offered and sold only to investors who are qualified institutional buyers in accordance with Rule 144A under the Securities Act and who, in the case of U.S. persons (as the term is defined in Regulation S under the Securities Act), are also qualified purchasers for purposes of Section 3(c)(7) of the Investment Company Act and may not be re-offered or re-sold except in compliance with all applicable transfer restrictions. Any purported transfer in violation of those restrictions will be null and void. In addition, the Bonds may be held only in certain permitted jurisdictions.
This press release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.