LONDON (Reuters) - Munich Re is marketing a new catastrophe bond through a special purpose vehicle set up to protect two North Carolina underwriting associations against $200 million of hurricane losses in the region.
Standard & Poor's assigned a B+ rating on the Series 2013-1 notes issued by Bermuda-based Tar Heel Re Ltd to cover the North Carolina Insurance Underwriting Association (NCIUA) and the North Carolina Joint Underwriting Association (NCJUA), the credit rating agency said in a statement.
So-called “cat bonds” are used by the insurance industry to transfer extreme risks, such as those for earthquakes or hurricanes, to financial market investors, who receive a handsome yield in return for agreeing to cover damages they consider unlikely.
Munich Reinsurance America, a unit of Munich Re which is the world's biggest reinsurer, will purchase reinsurance from Tar Heel Re, and transform the proceeds of the bond issue into a reinsurance agreement for the two North Carolina Associations.
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