$260m Leo Re reinsurance sidecar funded by PGGM for 2018

by Artemis on December 22, 2017

A new $260 million Leo Re Ltd. collateralised reinsurance sidecar transaction has been issued on behalf of Dutch pension fund manager PGGM, as the organisation returns for its second issuance under the Leo Re vehicle, following its $200 million 2017 sidecar arrangement.

A year ago, Leo Re Ltd., a Bermuda domiciled special purpose insurer, issued $200 million of Series 2017-1 Class A notes which collateralised underlying reinsurance arrangements and was funded by Dutch pension fund manager PGGM on behalf of one of the pensions it administers, the Dutch healthcare and social welfare sector’s PFZW.

Now, it appears PGGM has returned with a second issuance under its Leo Re sidecar vehicle, in an upsized for 2018 transaction that saw Leo Re Ltd. issuing $260 million of notes.

Leo Re has issued the $260 million of Series 2018-1 Class A Participating Notes, for and on behalf of a Leo Re Segregated Account 2018-1. The notes have been listed on the Bermuda Stock Exchange (BSX) and are due for maturity as of March 22nd 2022.

Participating notes are debt issuance that enables third-party investors to participate in a collateralised reinsurance portfolio, usually a quota share of a ceding companies property catastrophe and sometimes specialty risks.

We assume that again PGGM has funded the Leo Re reinsurance sidecar on behalf of one of the pension funds it manages, likely PFZW again which invests across the insurance-linked securities (ILS) spectrum through allocations to ILS fund managers.

The pension fund had more than $4 billion allocated to the ILS asset class in the past, making it one of the largest institutional investors in the reinsurance and ILS sector.

The use of segregated account vehicles and special purpose insurers as sidecars, in order to cede insurance and reinsurance risks to third-party capital market investors continues apace, with a number of reinsurance sidecar transactions already confirmed for this January 2018 renewal and more expected to come to light over the coming weeks.

These transactions, akin to a sidecar, offer the sponsor or cedent (which is unknown in this case) with a mechanism to bring insurance-linked investors into its capital model, leveraging the efficiency of ILS capacity for underwriting and to share a portion of its risks and underwriting returns with the ILS investors, PGGM managed funds in this case.

For more details on reinsurance sidecar transactions and investments view our list of collateralized reinsurance sidecars.

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