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Swiss Re and RenRe both launch new retro cat bonds

13th December 2019 - Author: Matt Sheehan

Reinsurers Swiss Re and RenaissanceRe (RenRe) have both returned to the capital markets with new catastrophe bonds that aim to provide retrocessional protection from natural disasters.

Artemis, the sister publication of Reinsurance News, was the first to report on these transactions, which could reflect a broader industry move towards alternative capital solutions while the retro market remains constrained.

Swiss Re is seeking to sponsor its second Matterhorn Re cat bond, which will aim to provide $175 million of retrocession against US named storm losses.

If successful, the transaction will continue Swiss Re’s increasing use of the capital markets, as it expands further into global peak property catastrophe risks.

The first Matterhorn Re deal, which secured Swiss Re $250 million of collateralised retro reinsurance back in June, marked the first cat bond issued by the reinsurer after several years away from the capital markets.

Now, Swiss Re has returned with a follow-up up deal that will provide coverage across two more hurricane seasons for US storm losses on a weighted industry loss and per-occurrence basis.

RenRe, meanwhile, is returning to the catastrophe bond market for the first time since 2013, with a $250 million or larger Mona Lisa Re Ltd. (Series 2020-1) transaction.

This cat bond will provide retrocessional reinsurance coverage for certain losses from the perils of U.S., Puerto Rico, U.S. Virgin Islands, D.C. named storms and earthquakes, and Canada earthquakes as well.

Coverage will be on an industry loss index trigger basis across a three-year term, with one tranche of notes set to provide annual aggregate reinsurance protection and the other per-occurrence protection to the beneficiaries.

The cat bond will cover losses specifically from personal, commercial and auto lines of business underwritten by RenRe and its DaVinci Re Ltd. vehicle, using data reported by PCS for the industry index trigger.

The return of both Swiss Re and RenRe to the capital markets seems to indicate that reinsurers are seeing more attractive options in the cat bond market currently, while capacity in the traditional retro market remains under pressure.

With rates up as much as 30% in the retro market, the industry could see more cat bond sponsors coming forward over the next few months.

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