Munich Re has used the capital markets to acquire coverage for Australian cyclone risks for the first time.

The placement – combined with US hurricane risks – has a total volume of $US75 million ($82.64 million).

The catastrophe bond, issued by reinsurance vehicle Queen Street VIII Re, matures on June 8 2016.

Under the arrangement, Munich Re obtains relief for losses from extreme events with a statistical return period of between 65 and 80 years.

Exposures in Queensland account for most of the initial expected losses from Australian cyclone events. The cat bond investors will receive a risk premium of 6.5% per year.

“This year we decided to commingle US hurricane risk with Australian cyclone risk [rather than EU wind] for the simple reason that cyclone as the second peril better matched the Munich Re risk budget utilisation,” Head of Risk Trading Unit Rupert Flatscher told insuranceNEWS.com.au.

“And of course we had strong indications from investors that such a new peril would be well received, which was finally confirmed by the good pricing we achieved.”