Munich Re Gets $80M Cat Bond For Hurricane Cover

NU Online News Service, May 20, 11:00 a.m. EDT

Munich Re said it obtained $80 million in catastrophe bond coverage for U.S. hurricane and European windstorm risks.

The Munich, Germany-based insurer said it obtained the coverage from special-purpose vehicle EOS Wind Ltd, which placed a catastrophe bond in the market.

Munich Re credited its asset management company, MEAG, registered in the Republic of Ireland, with coming up with "the innovative solution of setting up a US Treasury bill fund as collateral for the bond."

The bond provides cover against extreme event losses with a statistical return period of around 70 years. It has a term of four years and consists of two tranches, which are collateralized payment obligations.

Tranche A, for a total of $50 million, covers U.S. hurricane risks only and pays interest for the risk at 6.80 percent. Tranche B, which totals $30 million, covers U.S. hurricane and European windstorm risks, pays 6.50 percent interest for the risk.

Both tranches are rated "Ba3" by Moody's rating agency, Munich Re said.