Munich Re lifts Eden Re reinsurance sidecar to $150m for 2024

Munich Re has now completed the placement of the second listed tranche of its Eden Re II Ltd. collateralized reinsurance sidecar for 2024, which lifts the reinsurers capital market investor-backed retrocessional protection from the structure to $150 million for this year.

The global reinsurance giant has been utilising a collateralized reinsurance sidecar structure named Eden Re since 2014.

Munich Re’s collateralized reinsurance sidecar is a regular feature of the January reinsurance renewal season each year and the reinsurer has been accessing capital market investors to source quota share based retrocessional reinsurance protection every year since then.

Every Eden Re sidecar transaction that Munich Re has sponsored is listed in Artemis’ Reinsurance Sidecar Transaction Directory.

The Eden Re II Ltd. reinsurance sidecar is the latest iteration of the vehicle and has been in use by the reinsurer since 2016.

Artemis was first to report back in December that, for 2024, the first tranche of Eden Re II notes to come to light were a $28.5 million issuance of Series 2024-1 Class A notes.

Munich Re typically brings two tranches of listed reinsurance sidecar notes to market each year, to support some of its retrocessional reinsurance arrangements, with one appearing in December and the second in January.

The $28.5 million tranche of Series 2024-1 Class A notes denoted the first layer of risk to have been placed for 2024, with those notes listed in advance of the end of last year.

Now, Artemis has learned that the second layer has been placed and the notes listed on the Bermuda Stock Exchange (BSX), with $121.5 million tranche of Series 2024-1 Class B Participating Notes issued and sold to insurance-linked securities (ILS) investors by Eden Re II Ltd.

Which is an increase in size, for the Class B second tranche of Munich Re’s Eden Re sidecar this year and takes the total placement to the higher level this year, at $150 million.

A year ago, the Class B notes were $113.6 million in size, which took the 2023 Eden Re II placement to $131.1 million for 2023.

So rising again to $150 million for 2024 looks positive, as it is the first increase we’ve seen for some years now.

This likely reflects the increased investor appetite for reinsurance sidecar investments that we’re seeing for 2024, thanks to higher returns and improved terms.

Prior to that, the two-tranche Eden Re II sidecar issuance for 2022 was $190 million in size, a year earlier, for 2021 it was larger still at $235 million, while in 2020 it was $285 million, back in 2019 it was $300 million, around $300 million in 2018 as well, and more than $360 million in size in 2017. You see the trend (details on earlier Eden Re sidecars can be found in our reinsurance sidecar Deal Directory.

Both tranches of the 2024-1 issuance from Eden Re II have been privately placed with qualified investors and the participating notes are scheduled for maturity on March 17th 2028, with both tranches now admitted for listing on the Bermuda Stock Exchange (BSX) as insurance related securities.

These sidecars allow Munich Re to share its underwriting returns (and losses) with ILS and capital market investors, securing a source of fully-collateralized retro protection and partnering with investors that have an appetite for the type of risks it can cede to them.

Quota share arrangements, such as through a sidecar, provide capital that drives growth while also moderating PML’s, enabling the reinsurer to better manage its exposures, particularly across property and catastrophe lines.

Munich Re’s Eden Re II sidecar structure occupies an important position in the firm’s retrocessional arrangements.

Investor appetite for reinsurer sponsored sidecars had been negatively affected by the loss experience many had suffered, but for investors they are still an attractive way to access the reinsurance-linked investment return of a broadly diversified book of property reinsurance business that has been underwritten by a market-leading company.

Investor appetite has now much-improved, helped by structural changes to sidecars, enhancements to terms and of course the much better returns now on offer in reinsurance.

As a result of this, as long as improvements are sustained and pricing remains adequate, we will likely see more and larger sidecars appear in the market over the coming months and years, providing a chance for this segment of the insurance-linked securities (ILS) market to return to growth for 2024.

Finally, it is important to note that we only tend to see the listed tranches of the Eden Re II sidecar and Munich Re could have private sidecar and quota share arrangements that are directly negotiated with larger investors as well, which certainly used to be the case with the Leo Re structure backed by pension investor PGGM.

Munich Re had, in total, secured US $513 million in collateralised quota share capacity for 2023 from sidecars and private arrangements.

View details of many reinsurance sidecar investments and transactions in our list of collateralized reinsurance sidecars transactions.