Munich Re has transferred earthquake risks in California to the capital markets for subsidiaries of Zurich in cooperation with Aon Capital Markets through a $190m catastrophe bond placement.
The issuer of the bond is Lakeside Re, a special purpose reinsurance company domiciled in the Cayman Islands, to which Munich Re has transferred the risks from a reinsurance treaty with Zurich American Insurance Company and its affiliates. In the event of an earthquake in California leading to large losses, the $190m will be available either in total or proportionately to cover the reinsurance for Zurich.
The three-year bond has a floating coupon of 6.5% over three-month LIBOR and is rated “BB+” by Standard & Poor's. In structuring the transaction, Munich Re's risk trading unit worked very closely with Aon Capital Markets, which was responsible for the placement.
Dr Thomas Blunck, member of the Munich Re board of management in charge of Risk Trading: “With this transaction, Munich Re is again supporting a key client in specifically developing capital market solutions for the management of its peak risks.”
