Reports this morning state that the Abu Dhabi sovereign wealth fund, the Abu Dhabi Investment Council, will take 50% of Bermudian reinsurance company Ariel Re in a deal alongside Grupo BTG Pactual, Brazil’s only public investment bank.
Bloomberg reports that the sovereign wealth fund of Abu Dhabi, which is a shareholder in the only publicly traded investment bank in Brazil BTG Pactual, will take 50% of the reinsurer. BTG Pactual will take the other 50% in the acquisition from ex-Goldman re/insurance arm Global Atlantic Financial Group Ltd.
The participation of the sovereign wealth fund shows the attraction that reinsurance business returns have for these large, institutional sources of capital. Increasingly, sovereign wealth funds have been showing interest in accessing reinsurance market returns, through insurance-linked securities (ILS) and other insurance linked investments.
The Abu Dhabi Investment Council is the investment arm of the government of Abu Dhabi, with around $90 billion of assets under its management much of which is sourced from the country’s oil wealth.
These large sovereign investment funds are looking for new alternative asset class opportunities at this time and the ILS and reinsurance space provides a valuable diversifier for their portfolios. As a result we could see these large investors increasingly participating in the reinsurance business, with acquisitions such as Ariel Re just one of the likely routes to entry.