Munich Re Provides $96 Million Cat Bond to Mass. Property Association

July 12, 2010

Munich Re has provided the Massachusetts Property Insurance Underwriting Association (MPIUA) with a $ 96 million catastrophe bond issuance that “transfers hurricane risk in Massachusetts to the capital markets,” said the reinsurer’s announcement.

“Munich Re acted as joint lead manager in the transaction, reinsured the risk via its US operation and placed the bond with institutional investors in the EU and Switzerland via its placement entity.” The announcement was made as a matter of record, and does not constitute an offer for sale of the bonds, all of which have been privately placed with “investors who are qualified institutional buyers.”

Munich Re America “has reinsured a portion of a catastrophe hurricane risk layer of the MPIUA that have been fully retroceded to Cayman Islands-licensed special purpose reinsurer, Shore Re Ltd., providing coverage up to a maximum of $96 million, ” the bulletin continued;

“Shore Re Ltd. issued under the program principal at-risk variable rate notes with a 3-year risk period. Due to MPIUA’s increased traditional reinsurance purchases, the notes were issued with a volume of $96 million, notwithstanding an oversubscribed book.”

The bonds, rated ‘BB’ by Standard & Poor’s, provide “cover against extreme event losses caused by hurricanes in Massachusetts with a statistical return period of around 70 years.”They pay interest for the risk at 700 basis points.”

Tony Kuczinski, President and CEO of Munich Re America, commented: “With the Shore Re transaction we have been able to provide our US clients with a capital markets transaction for the second time within two months. Munich Re offers its clients the full spectrum of risk transfer solutions from traditional reinsurance to capital market solutions. The capital markets constitute a good complementary risk carrier for specialized peak risks like Massachusetts hurricane.”

Source: Munich Re

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