Peak Re looks to expand use of ILS after success of Lion Rock Re

The launch of the Lion Rock Re Ltd. sidecar by Hong Kong domiciled Peak Reinsurance Company Limited (Peak Re) was well received by the ILS investor community and the company is looking forward to expanding its relationship with the capital markets in the future.

Lion Rock Re Ltd., a recently established Bermuda special purpose insurance vehicle, is the first Asian reinsurance sidecar deal, providing Peak Re with a source of capital markets backed collateralised retrocession.

Following the announcement of the launch of the sidecar vehicle, Artemis spoke with the reinsurer’s CEO, Franz Josef Hahn, and also Lawrence Cheng, Managing Director, Underwriting, Peak Re.

Launched in 2012, Peak Re has established a sizeable book of international business, with a focus on Asia. Speaking to Artemis, the company’s CEO explained why the firm is looking to the capital markets at this time.

“Peak Re has achieved tremendous success with five years of conservative profit with a global diversified book of business with a focus on Asia. With our track record, we are able to attract international institutional investor to help further develop the insurance industry, in particular for the emerging markets.

“We are an international reinsurance company based in Hong Kong that wants to modernise the industry, specifically when it comes to our offering to our emerging Asia clients. The cooperation with the capital markets assists in our job to be highly efficient in matching capital to risk.

“Lion Rock Re will further improve our financial flexibility by diversifying sources of capital to support our strong growth and business development. These benefits will enhance our financial strength and boost our standing as a leading Asia-based global reinsurer,” said Hahn.

The structuring and issuance of a sidecar can have its implications and challenges, but for Peak Re, and bearing in mind that this is the first time the reinsurer has worked with the alternative capital markets, the process was executed successfully.

Cheng, explained: “In fact, it is the first time any Asian reinsurer has ever launched a sidecar.  With the help of our advisers, including Aon and Mayer Brown, we are able to execute our plan successfully.

“We are very pleased to see the overwhelming response from a range of world-class global investors. As a result, we raised the deal size to US$75m, rather than the typical first issuance of USD$50m. We see it as a vote of confidence to Peak Re’s track record as well as to Hong Kong from the international capital markets.”

He continued to explain that one of the key reasons for the overwhelming response from investors is down to the company’s unique book of business.

“While most portfolios are dominated by US exposure, our portfolio is dominated by Asia exposure but at the same time able to generate the level of profit required by our investors,” said Cheng.

In light of how successful Peak Re’s first sidecar issuance has been and how well received it was by the investor community, Hahn explained that the firm is looking forward to expanding its relationship with the capital markets and insurance-linked securities (ILS) in the future.

“Fund raising via a sidecar is an important way to improve our financial flexibility. It provides us diversifying sources of capital to support Peak Re’s strong growth and business development. We are very pleased with the positive reception from the ILS investors that recognise our strong track record.

“Peak Re believes in stable long-term relationships and this is one of the key reasons behind our successful results that we have achieved to date.

“We definitely look forward to continuing to broaden our partnerships with the capital markets and expanding our sidecar / other ILS offerings in the future,” said Hahn.

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