The recently issued $200 million Leo Re Ltd. collateralised reinsurance sidecar transaction was funded by Dutch pension fund manager PGGM on behalf of one of the pension funds it administers, the Dutch healthcare and social welfare sector’s PFZW.
A representative of PGGM confirmed the investment to Artemis today. This is the first time we’ve become aware of a pension fund directly and solely capitalising a special purpose insurer or reinsurance sidecar for itself.
It marks an interesting way for a large investor in the insurance-linked asset class (ILS) to access a significant amount of risk without the need for an asset manager.
There have been other sidecars which have had a sole investor capitalising them, but in recent years these vehicles have tended to be co-mingled investment offerings, with multiple investors allocating to them.
But as setting up, establishing and running special purpose reinsurance vehicles becomes more cost-efficient, this is likely a trend we’ll hear about more frequently as large investors look to secure more risk.
With PGGM acting as a pension fund asset manager for its clients, which are largely Dutch government or state entity pension funds, the ability to access the asset class more directly perhaps helps to reduce fees to a degree, but also provides it with more flexibility to source reinsurance risks for its clients.
Leo Re Ltd. issued a $200 million tranche of Series 2017-1 Class A participating notes from a segregated account in late December and PGGM told us today that PFZW, the Dutch healthcare pension fund, owns all of the notes that were issued.
In fact, the Dutch pension fund has continued to grow its ILS assets and now has $4 billion allocated to the insurance and reinsurance linked asset class, which puts it as one of, or perhaps the, biggest single investors in the ILS space.PFZW has somewhere north of EUR 180 billion of assets under its management.
For more details on reinsurance sidecar transactions and investments view our list of collateralized reinsurance sidecars.