$100M Munich Re cat bond covers U.S. hurricane, European windstorm risks

MUNICH—Munich Reinsurance Co. on Monday said it has obtained $100 million of coverage for U.S. hurricane and European windstorm risks from the capital markets.

Munich Re said it acquired the coverage from Ireland-based special-purpose vehicle Queen Street IV Capital Ltd., which placed a catastrophe bond in the capital markets.

Risk modeling for the bond, which is rated BB- by Standard & Poor's Corp., was provided by AIR Worldwide Corp., Munich Re said in a statement.

The bond has been placed among a diversified group of investors including investment funds, hedge funds, insurers and reinsurers, Munich Re said.

In addition to the risk premium of 7.5%, investors will receive variable-rate interest paid from a U.S. money market fund that collateralizes the bond and is rated AAAm by S&P, Munich Re said.

“Catastrophe bonds continue to be a supplementary means of transferring risk, which we use selectively,” Thomas Blunck, a board member of Munich Re, said in the statement. “The positive response by investors shows the interest of the capital markets in the transparent and noncorrelated insurance risk,” he added.