Munich Re starts Eden Re II 2025 sidecar with $64.5m Class A notes, largest since 2019
Munich Re has been back in the capital markets to secure quota share based retrocession and to start the 2025 sidecar arrangement for the reinsurer, its Eden Re II Ltd. collateralized reinsurance vehicle has issued $64.5 million of Series 2025-1 Class A notes, which is the largest Class A tranche from the structure since 2019, Artemis can report.
Munich Re, one of the world’s largest reinsurance firms, has been accessing capital markets investor sources of supportive quota share capacity through an Eden Re sidecar vehicle since 2014.
Every Eden Re sidecar transaction that Munich Re has sponsored is listed in Artemis’ Reinsurance Sidecar Transaction Directory.
In almost every year, Munich Re has sponsored an issuance of two tranches of syndicated reinsurance sidecar notes from its Eden Re vehicles, which are based in Bermuda.
The Eden Re sidecar issuances had been shrinking in size until the 2024 vintage, when Munich Re secured $150 million of retrocession through the Eden Re II structure a year ago, which was up slightly on the prior year.
Now, Artemis has learned that for 2025, Munich Re’s sidecar vehicle Eden Re II Ltd. has issued a $64.5 million tranche of Series 2025-1 Class A notes, which is the first layer of risk to have been placed for the coming year and the notes have been issued and listed in advance of the end of 2024, as is typical.
Munich Re typically brings two tranches of listed reinsurance sidecar notes to market every year, one in late December, the other in early January, as it looks to capital market investors to support some of its retrocessional reinsurance needs.
The Series 2025-1 Class A notes, at $64.5 million, are the largest Class A issuance from one of Munich Re’s Eden Re sidecars since 2019.
A year ago the Series 2024-1 Class A issuance was just $28.5 million in size, while prior to that the Series 2023-1 Class A notes amounted to just $17.5 million.
Back in 2019, the last time an Eden Re Class A sidecar notes issuance was larger than the new deal, the Series 2019-1 notes were $86.8 million in size, since when they had shrunk through 2013, but then began to grow again.
Sidecar usage had fluctuated over that period, as sponsors struggled to generate as much support from investors who were still digesting losses from peak catastrophe years of 2017 and 2018, it seems.
But Munich Re has persisted and its Eden Re and Eden Re II collateralized reinsurance sidecars have been a regular syndicated quota share feature of the January reinsurance renewal season every year, as the company has been accessing capital market investors as a source of quota share based retrocessional reinsurance protection through its Eden Re series of collateralised sidecar vehicles since 2014.
The Eden Re II Ltd. reinsurance sidecar is the newest iteration of the vehicle, having been in use by Munich Re since 2016.
Munich Re has been sharing some of its underwriting returns (and losses) with ILS and capital market investors through the Eden series, securing a source of fully-collateralized retrocessional reinsurance protection by partnering with investors that have an appetite for the type of risks it can cede to them.
Quota share arrangements, such as through a sidecar, provide efficient and diversifying capital that can be used to drive growth for their sponsors, while also moderating PML’s, enabling firms like Munich Re to better manage their exposures, particularly across property and catastrophe lines.
Munich Re always sponsored multiple tranches of notes issued by its Eden Re II Ltd. special purpose insurer (SPI) each year, with a Class A and Class B tranche offered for the last few.
The Bermuda based special purpose reinsurance structure normally issues a first Class A tranche in December (which this new note issuance represents), while a second, typically much larger tranche of notes have tended to appear in January.
For 2025, Munich Re has started with this $64.5 million tranche of Eden Re II Ltd. Series 2025-1 Class A sidecar notes, as we said the largest Class A tranche from the vehicle since 2019. The otes were issued by Eden Re II Ltd. acting on behalf of a 2025-1 segregated account.
Maturity is due for the participating notes, which have been privately placed with qualified investors, on March 19th 2030 and the $64.5 million issuance has been admitted for listing on the Bermuda Stock Exchange (BSX) as insurance linked securities.
Investor appetite for reinsurance sidecar investments has been improving over the last two years and now, for 2025, it appears Munich Re may secure its largest Eden Re sidecar for some time.
With this Class A notes issuance from Eden Re II the largest since 2019, it will be interesting to see how large the expected Class B tranche will be.
A year ago, the full Eden Re II sidecar issuance for 2024, across both Class A and B note tranches, was just $150 million in size.
Looking back though, Munich Re secured $300 million in quota share based retrocession from its Eden Re sidecar for 2019.
After which the structure shrank to $285 million for 2020, then $235 million for 2021, then was downsized to $190 million for 2022, and then just $131.1 million for 2023, before then recovering back to the $150 million for 2024.
Based on this first Class A note issuance for 2025 being much larger than the prior year, it seems there is a strong chance we see a larger full Eden Re II sidecar for the coming year, reflecting the fact that sidecars remain an important source of retrocession for Munich Re, enabling it to share in the risks and returns of its underwriting with third-party investors and ILS funds that allocate to the structure.
It’s worth also noting that Munich Re has other collateralized reinsurance sidecar arrangements than the Eden Re series.
As we reported back in October, PGGM, the Dutch pension fund investment manager that allocates on behalf of its end-client the Dutch pension PFZW had increased its target allocation range for the Leo Re sidecar structure, which is a partnership with Munich Re.
PFZW’s target allocation range for its Leo Re sidecar investment had sat at between EUR 250 million and EUR 500 million through 2022 and 2023, into early 2024. But, as of the middle of this year, the target allocation range for Munich Re’s Leo Re sidecar vehicle had been doubled to between EUR 500 million and EUR 1 billion.
As we reported earlier this month, Munich Re’s collateralised reinsurance sidecar structures grew to $650 million in 2024, as the company elevated its use of retrocession, aligned with its growth in natural catastrophe exposure from its underwriting.
The Eden Re II sidecar structure is a core syndicated sidecar arrangement for the reinsurer, while the Leo Re partnership with PGGM / PFZW is another arrangement that allows Munich Re to partner with sources of institutional capital.
View details of many reinsurance sidecar investments and transactions in our list of collateralized reinsurance sidecars transactions.