Munich Re triples Queen Street cat bond to $300m, its biggest ever sponsored

Munich Re, the global reinsurer, has now successfully secured the tripling in size of its new Queen Street 2023 Re dac catastrophe bond transaction to $300 million, becoming the biggest cat bond ever sponsored by the company.

Munich Re has been a sponsor of catastrophe bonds for more than two decades and this new one, which is the 22nd issuance sponsored by the reinsurer that Artemis has tracked, is now the biggest of them all.

That’s notable, as Munich Re has been a careful participant in the cat bond market as the company has not been a significant user of retrocession, but this could imply that market conditions make leveraging more capacity from the cat bond market could be more efficient than accessing other forms of retrocession, or even increasing the size of its sidecar.

It may also imply that Munich Re sees a need for more US named storm retrocession in 2023, as the company has grown its book in the much improved and harder reinsurance rate environment.

Munich Re returned to the catastrophe bond market in April, looking to sponsor its first Queen Street cat bond issuance since 2016 and at first had only a $100 million target for the deal.

As we later reported, the targeted issuance size had been doubled to $200 million of protection for Munich Re and then on Friday we reported again that the target had been lifted to between that level and $300 million.

Now, we’re told by sources that the Queen Street 2023 Re dac notes being issued have been successfully priced and the cat bond therefore secured at the $300 million size, so tripling the initial target.

So, with this new Queen Street 2023 Re catastrophe bond, Munich Re will benefit from a $300 million capital markets backed source of multi-year US named storm retro reinsurance protection, covering it for three wind seasons, on an industry-loss trigger basis.

At the same time, we’re told the pricing was finalised at a level below the initial spread guidance range.

Initially, these Queen Street 2023 Re cat bond notes, which come with an initial base expected loss of 1.72%, were offered to cat bond investors with price guidance in a range from 8% to 8.75%.

That price guidance was first reduced to the bottom-end at 8%, then reduced again to indicate a spread of between 7.5% and 8%.

Sources say the spread was eventually finalised at 7.5%, so below the initial guidance and an almost 11% discount from the initial mid-point.

Which is a very strong result for Munich Re and this should resonate with other retrocession buyers, who will be watching the major reinsurer securing much more cover at a reduced price and this could attract other retro buyers back to the cat bond market this year.

You can read all about this new Queen Street 2023 Re dac catastrophe bond that is being sponsored by Munich Re, and view details of more than 900 other cat bond issuances, in the extensive Artemis Deal Directory.