Swiss Re Insurance-Linked Fund Management

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ILS and cat bonds not about fee income for Swiss Re: CFO Quinn


For global reinsurer Swiss Re the growing use of third-party capital in the reinsurance market does not equal a hunt for fee income. For Swiss Re insurance-linked securities (ILS), catastrophe bonds and third-party capital are tools to support their clients and own risk transfer needs.

Group CFO of Swiss Re George Quinn explained as much during the reinsurers third-quarter earnings call at the end of last week. Swiss Re structures catastrophe bonds and ILS for clients, acts as a transformer at times passing risk from clients to special purpose vehicles or to investors and also uses ILS for its own retrocessional reinsurance needs.

The reinsurer does not see the fee income achievable from these activities as a core reason for being involved in ILS and third-party reinsurance capital, preferring to focus on the needs of its clients and provide them with solutions that enhance their risk transfer.

Quinn said that clients are the number one priority at Swiss Re and, as they have a desire to use ILS and third-party capital, so Swiss Re enables them to do so through its own infrastructure. Making fee income is not Swiss Re’s number one aim, he said, ILS activities do bring in fee income but the reason for being in ILS is because it is a valuable offering to its clients not to target the fees.

Quinn explained on the call; “It doesn’t really make a difference to us financially if we have a fee for passing through large risks. I mean we really see it, one, on helping our clients, and number two, on readying us in risks that are maybe in excess of our risk appetite, or otherwise would change the shape of our portfolio, in a way that is more capital efficient, but it’s not really about the fees.”

Swiss Re has been offering these services to its clients and using ILS and alternative reinsurance capital for its own risk transfer needs since that market became established. At the moment it looks like the reinsurer has no plans to begin actively managing external capital for underwriting with, preferring to use its own balance sheet for that, but will continue to use ILS and alternative reinsurance capital where appropriate for its clients and for itself.

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