Munich Re launches $190mn cat bond for ZFS
Munich Re has made its latest foray into the world of reinsurance securitisation with the launch of a $190mn cat bond on behalf of Zurich Financial Services Group (ZFS) to cover Californian earthquake risks.
The latest transaction in the burgeoning market for risk securitisation takes the total volume of natural catastrophe bonds issued in 2006 to around $4.4bn.
The bond has been issued by Cayman Islands-domiciled special purpose reinsurance vehicle Lakeside Re Ltd, with the German giant transferring risks from a reinsurance treaty with ZFS subsidiary Zurich American Insurance Company.
Cover will kick in if an earthquake strikes California leading to large losses, paying out either proportionately or for the total $190mn.
Dr Thomas Blunck, who heads up Risk Trading at the reinsurer, commented: “With this transaction, Munich Re is again supporting a key client in specifically developing capital market solutions for the management of its peak risks.”
The three-year bond, placed by Aon Capital Markets, has a floating coupon of 6.5 percent over three month-LIBOR and is rated BB+ by Standard & Poor’s.
Risk Management Solutions modelled the underlying risk.
ZFS’ Kamp Re was triggered following Hurricane Katrina, the first time a major catastrophe bond has experienced a loss. The $190mn indemnity bond was launched by Munich Re’s rival Swiss Re in August 2005.