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Munich Re transfers European windstorm risks to the capital markets

2011/07/29

Reinsurance

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    Munich Re has acquired coverage for European windstorm risks with a total volume of US$ 150m from the special-purpose vehicle Queen Street III Capital Limited, which in turn has placed a catastrophe bond for this amount on the capital markets. MEAG, Munich Re's asset manager, has set up a US Treasury bill fund specifically to collateralise this catastrophe bond.

    The transaction was structured and arranged by Munich Re. The catastrophe bond was issued by special-purpose vehicle Queen Street III Capital Limited, which is registered in the Republic of Ireland, while the risk modelling was developed by AIR Worldwide. With this bond, Munich Re obtains relief for losses from extreme events with a combined statistical return period of around 50 years. The bond has received a rating of B+ from Standard & Poor's, and the risk premium is 4.75%. Marketed in only three working days, the bond met with a very positive response and was substantially oversubscribed. On this basis, Munich Re has been able to obtain retrocession cover at an attractive price.

    As well as the risk premium, investors will receive variable-rate interest paid from the US Treasury bill fund set up by MEAG specifically to collateralise this catastrophe bond. It carries Standard & Poor’s top AAAm rating. Loss events will be quantified on the basis of a weighted market loss trigger. Market losses will be determined for European windstorm by PERILS AG (Zurich). Queen Street III has placed the bond globally among a broadly diversified group of international investors comprising mainly investment funds and hedge funds, but also insurers and reinsurers.

    Board member Thomas Blunck: "Catastrophe bonds are establishing themselves as a supplementary means of transferring risks. Munich Re is taking advantage of the favourable market environment for cat bonds to obtain cover for the peak risk 'Storm Europe'. The market response shows the interest of specialised investors in the instrument of catastrophe bonds, with their very transparent risk."

    Back in March, Munich Re placed Queen Street II, with a volume of US$ 100m. That catastrophe bond covers risks from hurricanes in the USA as well as windstorms in Europe.

    Munich, 29 July 2011

    Münchener Rückversicherungs-Gesellschaft
    Aktiengesellschaft in München

    Media Relations

    Königinstrasse 107
    80802 München
    Germany
    Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. Munich Re creates value for clients, shareholders and staff alike. In the financial year 2010, the Group – which pursues an integrated business model consisting of insurance and reinsurance – achieved a profit of €2.4bn on premium income of around €46bn. It operates in all lines of insurance, with around 47,000 employees throughout the world. With premium income of around €24bn from reinsurance alone, it is one of the world’s leading reinsurers. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. Our primary insurance operations are concentrated mainly in the ERGO Insurance Group. With premium income of over €20bn, ERGO is one of the largest insurance groups in Europe and Germany. It is the market leader in Europe in health and legal protection insurance. More than 40 million clients in over 30 countries place their trust in the services and security it provides. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand. Munich Re’s global investments amounting to €193bn are managed by MEAG, which also makes its competence available to private and institutional investors outside the Group.

    Disclaimer
    This press release is prepared for the purpose of public announcement of 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 in the United States 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.

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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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