Munich Re’s Eden Re II sidecar issues $28.5m in first tranche for 2024

Global reinsurance giant Munich Re has returned to the capital markets to refresh its retrocessional protection from the Eden Re II Ltd. collateralized reinsurance sidecar for 2024, with the first tranche of notes to come to light being $28.5 million 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.

For 2024, the first Artemis has learned of from Munich Re’s sidecar vehicle Eden Re II Ltd., is the issuance of a $28.5 million tranche of Series 2024-1 Class A notes, denoting the first layer of risk to have been placed and notes listed in advance of the end of the year.

Which is up on the Eden Re II Class A tranche of notes issued a year ago, when the sidecar issued a $17.5 million tranche of Series 2023-1 Class A notes.

But still down on prior years, when the Class A tranche of the Eden Re sidecars had been $42.1 million for 2022 and $55.1 million for 2021.

Sidecars have generally fluctuated in size over recent years, but investor appetite for them has risen again after structural changes and updates to terms have improved the economics, while the much higher reinsurance pricing of the underlying quota shares is also now far more attractive.

Munich Re’s collateralized reinsurance sidecar is a regular quota share feature of the January reinsurance renewal season every year and the reinsurer has been accessing capital market investors as a source of quota share based retrocessional reinsurance protection through its Eden Re series of collateralised sidecar vehicles since 2014.

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.

These sidecars enable Munich Re to share its underwriting returns (and losses) with ILS and capital market investors, securing a source of fully-collateralized 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 has typically sponsored two tranches of notes issued by its Eden Re II special purpose insurer (SPI) each year, for the last few.

The Bermuda based reinsurance structure usually issues a first Class A tranche in December, while a second, normally much larger tranche of notes tend to appear in January.

For 2024, Munich Re has started with this $28.5 million tranche of Eden Re II Ltd. Series 2024-1 Class A sidecar notes.

Maturity is due for the privately placed participating notes on March 17th 2028 and the notes have been admitted for listing on the Bermuda Stock Exchange (BSX) as insurance related securities.

Munich Re’s fully collateralised reinsurance sidecar Eden Re II continues to play an important role in the firm’s retrocessional arrangements, enabling it to share in the risks and returns of its underwriting with third-party investors.

Investor appetite for reinsurer sponsored sidecars was negatively affected by the loss experience some have suffered over the last five or six years, but for investors they remain an attractive way to access the returns of a broadly diversified book of property reinsurance business that has been underwritten by a market-leading firm.

Investor appetite has now improved, helped by structural changes and the much better returns on offer. As a result of which, there are likely to be more and larger sidecars in the market over the coming months, providing a chance for this segment of the insurance-linked securities (ILS) market to return to growth for 2024.

We expect Munich Re will bring its usual Class B tranche of notes to market after the renewal, as is typical. It’s important also to remember that we only see the listed tranches of the Eden Re II sidecar and Munich Re may have private sidecar arrangements that are directly negotiated with larger investors as well.

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