Cayman-registered Johnston Re will provide hurricane coverage for two North Carolina insurance groups

Munich Re has created a special purpose vehicle, Johnston Re Ltd, to receive retrocession on some of its North America risks.

Standard&Poor's Ratings Services has assigned its 'BB-' rating to the Series 2010-1 Class A and B notes to be issued by the special purpose vehicle, which is registered as a Cayman Islands exempted company, licensed as a Class B insurer in the Cayman Islands.

The special purpose vehicle is expected to cover the hurricane exposures of two North Carolina non-profit groups which have insurance companies as members, according to reports. They are the North Carolina Joint Underwriting Assn. and the North Carolina Insurance Underwriting Association.

The cedent will be Munich Reinsurance America Inc. (AA-/Stable/--).

The SPV will provide retrocession for hurricane losses in North Carolina and the Barrier Islands until May 2013, although one component of the Johnston Re notes replaces coverage of $200m under Swiss Re’s Parkton Re which is due to expire in 2011, S&P said. (See linked story)

HSBC Bank (Cayman) Ltd., as share trustee, holds all of Johnston Re's issued and outstanding shares in trust for charitable or similar purposes.

Munich Re America Inc. will be responsible for the premium payments due under the retrocession agreement in place between it and Johnston Re. Covered losses will not be directly linked to Munich Re.