Munich Re increases transfer of large natural catastrophe risks to the capital markets

2016/01/14

Munich Re again has acquired capital market capacity providing cover for natural catastrophe exposure in its book of reinsurance business. The cover is provided through a renewal transaction under its Eden Re II sidecar program and a new catastrophe bond transaction Queen Street XI.

Munich. Eden Re II Ltd., a Bermuda-registered special purpose insurer, issued Series 2016-1 Notes to investors with a volume of US$ 360m, with those proceeds serving as collateral to Munich Re’s cover for the risk period 1 January until 31 December 2016. The transaction renews the Eden Re II Series 2015-1 whose risk period matured on 31 December 2015 which had a lower volume of US$ 290m. The sidecar transaction transfers risks via quota-share retrocession agreements with pro-rata sharing of risk and premiums. With this transaction, Munich Re transfers a share of its book of non-proportional covers for property cat treaties mainly exposed to natural catastrophe events in North America and Australia to Eden Re II Ltd. Investors in the notes receive a corresponding share of premiums. With this risk transfer structure, investors follow Munich Re’s underwriting standards in full. Munich Re retains a majority of risk exposure from this book of business.

Using the reinsurance vehicle Queen Street XI Re dac, Munich Re additionally acquired coverage for US hurricane and Australian cyclone risks with a total volume of US$ 100m. The transaction is comparable to previous Queen Street transactions. The notes – which will mature on 7 June 2019 – have been issued by Queen Street XI Re dac, a special purpose reinsurer registered in Ireland. The risk modelling was developed by AIR Worldwide. With this transaction, Munich Re obtains relief for losses from extreme events with a statistical return period of between 65 and 85 years per event. The bond has a variable rate of interest based on the risk premium, equal to 6.15% per annum, and yield paid from a US money market fund collateralising the catastrophe bond.

Board Member Thomas Blunck said: “The current market environment made both transactions attractive for investors, which at the same time made the risk transfer valuable for us.”

Munich Re structured and arranged both transactions, while Deutsche Bank Securities acted as Sole Bookrunner.

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This corporate news 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.

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Disclaimer

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 Munich Re. Munich Re assumes no liability to update these forward-looking statements or to conform them to future events or developments.

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