NU Online News Service, Feb. 28, 1:15 p.m. EST
Munich Re says it established a $75 million catastrophe bond through the Bermuda-based special purpose insurer Queen Street V Re Ltd. for hurricane exposure in the United States and European windstorm.
The bond has a mature date of April 9, 2015 and a rating of "B-plus" from Standard & Poor's.
The risk modeling for the bond was done by AIR Worldwide and gives the company "relief for losses from extreme events with a combined statistical return period of around 50 years."
The bond has variable rates of interest based on the risk premium and yield paid from a U.S. money market fund that collateralized the bond, Munich Re says.
Market losses for U.S. hurricanes will be determined by Property Claim Services, a subsidiary of the Jersey City, N.J.-based Insurance Services Office, and European windstorms will be determined by PERILS AG, a Zurich-based independent insurance data company.
In a statement, Thomas Blunck, board member of Munich Re says the company "adheres to its strategy of selectively using catastrophe bonds as a supplementary means of transferring peak risks from our own book. The response from investors was positive despite a challenging market environment, with high spreads in other asset classes with comparable ratings. This shows that investors appreciate the diversifying effect from cat bonds that are virtually uncorrelated with trends on the capital markets as such."
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