PGGM secures $140m Leo Re sidecar tranche, takes 2018 issue to $400m

by Artemis on January 2, 2018

Dutch pension fund manager PGGM has secured a second issuance from its collateralised reinsurance sidecar, as the Leo Re Ltd. vehicle issued a $140 million Series 2018-1 Class B tranche of notes, shortly after issuing a $260 million Class A tranche earlier in December.

This new Leo Re Ltd. collateralised reinsurance sidecar transaction takes the 2018 Series to $400 million in total, a significant increase on the $200 million 2017 sidecar arrangement.

The Leo Re vehicle enters into collateralised reinsurance arrangements, which are 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 pension.

In December we covered the Series 2018-1 Class A issuance of notes by Leo Re, a $260 million layer of risk securitised for PGGM’s managed pension fund to invest in.

Now, Leo Re Ltd. has issued a $140 million tranche of Series 2018-1 Class B Participating Notes as well, also for and on behalf of a Leo Re Segregated Account 2018-1. This second tranche of notes have also been listed on the Bermuda Stock Exchange (BSX) and are due for maturity as of March 22nd 2022, the same date as the Class A notes.

Again, it’s assumed that PGGM has funded the Leo Re reinsurance sidecar on behalf of the PFZW pension fund, which invests across the insurance-linked securities (ILS) spectrum through allocations to ILS fund managers and now more directly using Leo Re.

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 the January 2018 renewal.

For an investor like PGGM, the Leo Re vehicle enables it to enter into direct ILS trades with counterparties, most likely quota share arrangements with a reinsurer for a share of their underwriting book.

These transactions, akin to a sidecar, provides PGGM with a way to bring its institutional capital closer to reinsurance counterparties, leveraging the efficiency of ILS capacity for underwriting and sharing in a portion of a cedents risks and underwriting returns.

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

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