Muteki Ltd., exempted company in the Cayman Islands, has transferred Japanese earthquake risks to the capital markets. The placement provides Munich Re with fully collateralized catastrophe protections for Japanese earthquake risks. Muteki Ltd. was established for the benefit of the largest Japanese mutual, Zenkyoren.
The securitisation gives Zenkyoren cover against losses in the event of devastating earthquakes in Japan. Munich Re acted as sole structurer of the transaction through which risks from catastrophic earthquake events in Japan are transferred from Zenkyoren to Munich Re and further transferred to Muteki which securitized the risks to the capital markets. The risk transfer is so designed that the protection level for Zenkyoren increases after the occurrence of moderate earthquakes that do not fully trigger the bond (so-called "drop down events"), thus accommodating the increased protection need of Zenkyoren after moderately severe events. Investors will in turn be rewarded with a higher risk spread ("step-up risk premium") in such a situation in order to avoid mark-to-market losses
"With this transaction we are supporting a key client and, by using the tried and tested instrument of securitisation, creating additional capacity for earthquake covers in the Japanese market", said Ludger Arnoldussen, member of Munich Re's Board of Management responsible for business in Germany, Asia Pacific and Africa.
The notes with a volume of US$ 300m were issued by Muteki Ltd; they have a term of three years and have been given a Ba2 rating by Moody's. The risk spread payable to investors is 4.40 percentage points above the three-month Libor, while the additional step-up risk premium after a drop-down event is 3.5 percentage points. The Muteki programme structure allows Zenkyoren to efficiently access the capital markets for transferring earthquake risks and other natural perils through future issuances for an aggregate volume of up to US$ 1bn.
"The issue has once again demonstrated that, despite the ongoing credit crisis, investors are highly receptive to securitisations of insurance risks as they diversify their portfolio in an attractive way. Munich Re will, as announced, realise more such capital market solutions for clients and also securitise risks in its own book of business", noted Thomas Blunck, member of the Board of Management responsible for the Special and Financial Risks Division.
Just under 40% of the securities were placed with investors in the European Union and in Switzerland via the Munich Re subsidiary Munich Re Capital Markets. Aon Capital Markets acted as book runner for the transaction. AIR Worldwide Corporation performed the Risk Modelling and will act as Calculation Agent for the transaction.
Disclaimer
This press release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.
This press release is not for publication or distribution, directly or indirectly, in, into or from the United States of America, Canada or Australia. This press release is prepared for the purpose of public announcement of the issuance of the bonds referred to herein (the "Bonds") and does not constitute or form part of any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for any securities in any jurisdiction, nor shall it (or any part of it) or the fact of its distribution form the basis of, or be relied upon in connection with, or act as any inducement to enter into, any contract or commitment therefor. All of the Bonds have been sold and this announcement is a matter of record only. The Bonds have not been and will not be registered under the U.S. Securities Act of 1933 or any state or foreign securities law and the issuer is not and will not be registered under the U.S. Investment Company Act of 1940. The Bonds were offered and sold only to investors who are qualified institutional buyers in accordance with Rule 144A who are also qualified purchasers for purposes of Section 3(c)(7) of the Investment Company Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the U.S. federal securities laws and may be held only in certain permitted jurisdictions.
The securitisation gives Zenkyoren cover against losses in the event of devastating earthquakes in Japan. Munich Re acted as sole structurer of the transaction through which risks from catastrophic earthquake events in Japan are transferred from Zenkyoren to Munich Re and further transferred to Muteki which securitized the risks to the capital markets. The risk transfer is so designed that the protection level for Zenkyoren increases after the occurrence of moderate earthquakes that do not fully trigger the bond (so-called "drop down events"), thus accommodating the increased protection need of Zenkyoren after moderately severe events. Investors will in turn be rewarded with a higher risk spread ("step-up risk premium") in such a situation in order to avoid mark-to-market losses
"With this transaction we are supporting a key client and, by using the tried and tested instrument of securitisation, creating additional capacity for earthquake covers in the Japanese market", said Ludger Arnoldussen, member of Munich Re's Board of Management responsible for business in Germany, Asia Pacific and Africa.
The notes with a volume of US$ 300m were issued by Muteki Ltd; they have a term of three years and have been given a Ba2 rating by Moody's. The risk spread payable to investors is 4.40 percentage points above the three-month Libor, while the additional step-up risk premium after a drop-down event is 3.5 percentage points. The Muteki programme structure allows Zenkyoren to efficiently access the capital markets for transferring earthquake risks and other natural perils through future issuances for an aggregate volume of up to US$ 1bn.
"The issue has once again demonstrated that, despite the ongoing credit crisis, investors are highly receptive to securitisations of insurance risks as they diversify their portfolio in an attractive way. Munich Re will, as announced, realise more such capital market solutions for clients and also securitise risks in its own book of business", noted Thomas Blunck, member of the Board of Management responsible for the Special and Financial Risks Division.
Just under 40% of the securities were placed with investors in the European Union and in Switzerland via the Munich Re subsidiary Munich Re Capital Markets. Aon Capital Markets acted as book runner for the transaction. AIR Worldwide Corporation performed the Risk Modelling and will act as Calculation Agent for the transaction.
Disclaimer
This press release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.
This press release is not for publication or distribution, directly or indirectly, in, into or from the United States of America, Canada or Australia. This press release is prepared for the purpose of public announcement of the issuance of the bonds referred to herein (the "Bonds") and does not constitute or form part of any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for any securities in any jurisdiction, nor shall it (or any part of it) or the fact of its distribution form the basis of, or be relied upon in connection with, or act as any inducement to enter into, any contract or commitment therefor. All of the Bonds have been sold and this announcement is a matter of record only. The Bonds have not been and will not be registered under the U.S. Securities Act of 1933 or any state or foreign securities law and the issuer is not and will not be registered under the U.S. Investment Company Act of 1940. The Bonds were offered and sold only to investors who are qualified institutional buyers in accordance with Rule 144A who are also qualified purchasers for purposes of Section 3(c)(7) of the Investment Company Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the U.S. federal securities laws and may be held only in certain permitted jurisdictions.
