Munich Re has assisted Zurich Financial Services Group in a US$ 225m catastrophe bond transaction that transfers the risk of severe earthquakes in California to the capital markets. Munich Re acted as joint lead structuring agent in the transaction and helped placing the bond with institutional investors in the EU and Switzerland via its subsidiary Munich Re Capital Markets GmbH.
The bond with a 3-year period pays 7.75% interest plus the yield on the underlying money market funds. The bond, issued by Cayman-Islands registered Lakeside Re II Ltd., provides coverage for the Zurich Group against severe earthquake losses in California up to a maximum of US$ 225m. Replacing the expiring Lakeside Re Ltd. transaction issued in December 2006, the issuance was oversubscribed.
“We are pleased to have again been able to assist our client Zurich Financial Services Group with a capital markets transaction. Munich Re offers its clients the full spectrum of risk transfer solutions. Catastrophe bond spreads recently returned to normal so that the capital markets again constitute a good complementary risk carrier for peak risks like California earthquake”, said Thomas Blunck, Munich Re Board member responsible for alternative risk transfer. “The transaction shows that investor confidence is returning.”
