Munich Re again transfers US hurricane and European windstorm risks to the capital markets
Munich Re has acquired coverage for US hurricane and European windstorm risks with a total volume of US$75m from the special purpose insurer Queen Street VII Re Limited, which in turn has placed a catastrophe bond for this amount in the capital markets. It was the third time in 2012 that Munich Re has transferred storm risks to the capital markets through a Queen Street vehicle.
The transaction is comparable to previous Queen Street transactions and was structured and arranged by Munich Re. The catastrophe bond matures on 8 April 2016 and was issued by Queen Street VII Re Limited, a Bermuda registered special purpose insurer. 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 35 years. The bond has received a rating of B (sf) from Standard & Poor's, and the risk premium is 8.60% p.a.
This catastrophe bond has a variable rate of interest based on the risk premium and yield paid from a US money market fund which collateralises the catastrophe bond. The fund was structured by MEAG, the asset manager of Munich Re (Group). It carries Standard & Poor’s top AAAm rating. Loss events will be quantified on the basis of county- and line-of-business-weighted market losses with respect to US Hurricane, and CRESTA-zone-weighted market losses with respect to Europe Windstorm. Market losses for US Hurricane will be determined by PCS (Property Claim Services) and for European Windstorm by PERILS AG (Zurich). Queen Street VII has placed the bond globally among a broadly diversified group of international investors mainly comprising investment funds and hedge funds, but also insurers.
Board member Thomas Blunck: “Munich Re has again used the current market environment to acquire coverage for our own book against events with a comparably high probability of occurrence. The response by investors has been positive. Investors still appreciate the transparent risk/return profile and the diversifying effect from cat bonds that are virtually uncorrelated with trends on the capital markets.”
Munich, 2 November 2012
Aktiengesellschaft in München
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.