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Munich Re realises capital market solution for risks assumed from the Zurich Financial Services Group / Placement of a catastrophe bond with a volume of US$ 190m to cover the risk of earthquakes in California

2006/12/21

Reinsurance

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    Munich Re has transferred earthquake risks in California to the capital markets for subsidiaries of the Zurich Financial Services Group (Zurich); in cooperation with Aon Capital Markets, it has provided coverage through a US$ 190m catastrophe bond placement.

    The issuer of the bond is Lakeside Re Ltd., a special purpose reinsurance company domiciled in the Cayman Islands, to which Munich Re has transferred the risks from a reinsurance treaty with Zurich American Insurance Company and its affiliates. In the event of an earthquake in California leading to large losses, the US$ 190m will be available either in total or proportionately to cover the reinsurance for Zurich.

    The three-year bond has a floating coupon of 6.5% over three-month LIBOR and is rated BB+ by Standard & Poor’s. In structuring the transaction, Munich Re’s Risk Trading Unit worked very closely with Aon Capital Markets, which was responsible for the placement. Risk Management Solutions (Newark/USA) modelled the underlying risk.

    Dr. Thomas Blunck, member of the Munich Re Board of Management in charge of Risk Trading: "With this transaction, Munich Re is again supporting a key client in specifically developing capital market solutions for the management of its peak risks."

    The market for natural catastrophe bonds has grown significantly since Hurricane Katrina; the total volume issued worldwide has amounted to around US$ 4.4bn so far in 2006. To date Munich Re has deployed catastrophe bonds for its own risk management, while on various occasions also supporting clients in developing capital market solutions to manage their own insurance risks. Munich Re was first involved in such a solution in 1998 when it helped protect the Yasuda Fire & Marine Insurance Company against risks from typhoon losses in Japan.

    Münchener Rückversicherungs-Gesellschaft
    signed Dr. Blunck           signed Küppers

    The Munich Re Group operates worldwide, turning risk into value. In the financial year 2007, it achieved a profit of €3,937m, the highest since the company was founded in 1880, on premium income of approximately €37bn. The Group operates in all lines of business, with around 44,000 employees at over 50 locations throughout the world and is characterised by particularly pronounced diversification, client focus and earnings stability. With premium income of around €21.5bn from reinsurance alone, it is one of the world's leading reinsurers. Its primary insurance operations are mainly concentrated in the ERGO Insurance Group. With premium income of over €17bn, ERGO is one of the largest insurance groups in Europe and Germany. It is the market leader in Europe in health and legal expenses insurance, and 34 million clients in over 30 countries place their trust in the services and security it provides. The global investments of the Munich Re Group amounting to €176bn are managed by MEAG, which also makes its competence available to private and institutional investors outside the Group.
    Disclaimer
    This media information 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. The company assumes no liability to update these forward-looking statements or to make them conform to future events or developments.

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