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Munich Re Transfers US Hurricane and Australian Cyclone Risks to the Capital Markets

Posted on 11 Mar 2014 by Neilson

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Munich Re cat bondsMunich Re has again utilised the capital markets to acquire coverage for US hurricane and Australian cyclone risks with a total volume of US$ 100m via the reinsurance vehicle Queen Street IX Re Limited, created to facilitate the eighth issuance of a catastrophe bond in the Queen Street series since 2011.

Munich. The transaction is comparable to previous Queen Street transactions and was structured and arranged by Munich Re. The catastrophe bond matures on 8 June 2017 and was issued by Queen Street IX Re Limited, 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 80 years per event. Loss events will be quantified on the basis of county- and line-of-business-weighted market losses determined by PCS (Property Claim Services) with respect to US hurricanes, and on the basis of modelled losses calculated by AIR Worldwide in respect of Australian cyclones.

The bond has a variable rate of interest based on the risk premium and yield paid from a US money market fund collateralising the catastrophe bond. The cat bond investors will receive a risk premium of 5.50% per annum. Queen Street IX Re Limited has placed the bond globally among a broadly diversified group of international investors.

Board member Thomas Blunck: 'With catastrophe bonds we can efficiently cover our single peak exposures like US hurricane and Australian cyclone and thereby improve the diversification of our overall portfolio. For the first time we chose Ireland as the location for a licensed SPRV. The bond has been well received by the market.'