Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Munich Re considering launching insurance-linked securities (ILS) fund


German reinsurer Munich Re, the largest reinsurance company in the world, is considering deepening its involvement in the insurance-linked securities market by launching an ILS fund. Munich Re are already very involved in the ILS and catastrophe bond space, as a sponsor of cat bonds regularly using ILS as a risk transfer tool, their Risk Trading Unit are active in the areas of consultancy, product development, structuring and placement of ILS and Munich Re are themselves an investor in catastrophe bonds as well.

Now it has become apparent that Munich Re also see an opportunity in the investment side of the ILS market and are investigating a move into investment management through launching an ILS fund.

In the latest copy of Munich Re’s Topics Magazine, Dr. Andreas Müller who heads up the Origination/Distribution/ILS Investments Department in the Munich Re Risk Trading Unit discusses ILS as an asset class and mentions the possibility that the reinsurer will launch an ILS fund.

The article mentions the growing demand from investors for ILS, why they make attractive assets for the likes of pension funds and that the larger the pool of ILS investors becomes the more attractive ILS are for the re/insurance industry as a stable source of peak risk transfer.

Dr. Andreas Müller writes in the article; “Since interest in this asset class is likely to increase among a wider range of investors, Munich Re is looking at launching an ILS fund for institutional investors such as insurers and pension funds.”

It’s an interesting move from the reinsurer and takes them into a new sector of investment management where they haven’t been historically active. Of course, being insurance and reinsurance linked investments, Munich Re are perfectly placed to leverage their significant experience in the ILS and cat bond space alongside their underwriting and risk expertise to manage an ILS fund effectively. Their size, reach and experience is sure to prove a draw for large institutional investors, like pension funds, who are looking to deploy capital into the ILS space with a name they feel they can trust.

If Munich Re follow through with this and launch an ILS fund it will position them quite uniquely, being involved in transactions from sponsoring, to structuring, to issuance, to investment, so touching on every point of the lifecycle of an ILS or catastrophe bond deal from issuance right up to maturity.

Dr. Müller wrote; “Investors would benefit from the extensive risk expertise provided by Munich Re, who would manage the entire ILS portfolio, paving the way for an attractive new asset class.”

It is of course entirely possible that Munich Re may prefer not to go it alone as an ILS fund manager and may partner with an existing investment manager in the ILS space, an emerging investment manager in the ILS space or an investment manager not yet active in ILS.

We hope to be able to update you with some further information on this interesting news regarding Munich Re’s plans to launch an ILS fund soon.

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