The Pension Fund of Credit Suisse Group reported that it is restructuring CHF 357.1 million of insurance-linked securities (ILS) investments and revealed an exposure to the running-off of rated reinsurance company Humboldt Re.
The pension fund said in its 2020 annual report that its Investment Committee has decided to restructure investments in insurance-linked securities (ILS) with a total value of CHF 357.1 million (around US $388m).
It seems that a driver of this is the shuttering and running-off of the Humboldt Re reinsurance company based in Guernsey, which as we reported at the time was being closed down due to strategic decisions taken by the ultimate institutional investors behind it.
It appears the Credit Suisse pension fund was one of those institutional investors that had supported Humboldt Re.
Humboldt Re was backed by capital from some of the insurance-linked securities (ILS) funds managed by Credit Suisse Asset Management (CSAM).
The Credit Suisse pension fund explained that, “The existing contracts with Humboldt Re will be settled in an orderly manner by means of run-off and no new business will be generated.”
However, it also disclosed that, “As of 2021, Humboldt Re will no longer generate income from new business, although operating costs for employees, systems, and services for ongoing settlement will still be incurred. These costs are estimated at CHF 20 million to CHF 25 million.”
So while the reinsurance contracts will run-off as experience allows, there will be a slight drag on the pension fund’s allocation due to these costs and expenses.
The pension fund report also said that, “At the same time, a process to try and sell Humboldt Re en bloc is underway.”
As a going concern, Humboldt Re may make an attractive start-up platform for a new reinsurance entity, or an ILS fund management operation looking for a rated reinsurance underwriting vehicle.