First Langhorne Re transaction still elusive for RGA, but pipeline building

While a first transaction remains elusive, the pipeline of potential deals that Reinsurance Group of America (RGA) sees as relevant to its joint-venture, third-party capital backed life and annuity reinsurance firm Langhorne Re continues to build and also expand.

Reinsurance Group of America (RGA) launched Langhorne Re alongside joint-venture partner RenaissanceRe (RenRe), the Bermudian reinsurer and experienced third-party capital manager.

Langhorne Re was launched at the start of 2018 and is the first venture into life and annuity reinsurance for RenRe, in partnrship with one of the largest players in that market in RGA.

Langhorne Re was established to augment RGA’s capacity to engage in large in-force block life transactions, helped by the backing of the third-party institutional investors from the capital markets. The vehicle will also generate fee income for both of the joint-venture partners and features investor capital with a longer-term horizon than your more typical catastrophe risk focused ILS JV.

But transactions have remained elusive, partly due to the high levels of competition for the very large transactions that Langhorne Re targets.

As we explained last year, RGA now sees Langhorne Re as fully ramped up and ready for business, actively bidding on some opportunities in the market.

But the company has not been in a hurry and while that first deal is still elusive, the pipeline of opportunities has continued to expand and RGA sees a widening array of potential first deals for Langhorne Re in the market.

CEO Anna Manning explained yesterday that the pipeline remains strong, saying, “We have an active pipeline in all of our regions. EMEA is particularly active, with respect to pension risk transfer and more asset intensive opportunity.”

It is these larger, asset intensive transactions, in particular in-force life insurance deals, where Langhorne Re could come into its own as a supportive source of capacity to enable RGA to compete for bigger deals.

“It’s a very good pipeline,” Manning continued, adding “It’s also a good pipeline for the larger transactions that would be directed at Langhorne.”

Competition remains high in the market, which is one of the factors that drives who wins bids for these large life or annuity type transactions.

Manning explained, “Competition is very strong on the transaction side and there’s also continuing interest from new players. So not only are there lots of competitors, butan  increasing number of competitors and we’re seeing them both from established companies and relatively recently new players.

“There’s a lot of interest in this part of our business. There are lots of large opportunities, but we continue to be successful and in large part because of the package that we are providing, this package of technical risk and structuring expertise, the relationships,  execution counterparty. We’re holding our own.”

She notes that 2019 was a strong year for the firm, as it deployed some $6465 million into in-force block life transactions, which followed a strong 2018 where RGA deployed just under $450 million.

“We’re getting our fair share of those transactions,” Manning said.

But so far Langhorne Re has not been called upon to support these deals and it’s likely the size of transactions that will need the support of third-party capital are much larger and so the lead-time is significantly longer and the number of deals much fewer.

In terms of these much larger in-force life insurance and reinsurance transactions that would fit the Langhorne Re strategy, Manning said that,” The EMEA region would be a region that has some attractive opportunities for Langhorne.”

But it appears Langhorne Re is also helping RGA to broaden its reach as well, with new types of transactions outside of the more typical life or pension risk transfer (PRT) space coming into view.

“We are also seeing a few opportunities that are not necessarily focused on the PRT type risks but are focused on different underlying biometric risks,” Manning said, again highlighting the EMEA region as the likely source of these.