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Munich Re & PGGM add $380m Leo Re 2019 private sidecar arrangement


Experienced insurance-linked securities (ILS) investor Dutch pension fund manager PGGM and global reinsurance firm Munich Re have now completed what appears to be the rest of their 2019 Leo Re Ltd. private sidecar arrangement, with another $380 million tranche of notes issued.

In December PGGM’s Leo Re Ltd. collateralised reinsurance sidecar issued a $20 million tranche of Series 2019-1 Class A notes, the first from the investors annual private arrangements that feature property catastrophe risk sourced from Munich Re.

Of course $20 million was unlikely to ever be the end of the arrangement, given the scale of PGGM’s investments into ILS and reinsurance and the amount of risk Munich Re can originate for the investor, hence this second tranche was to be expected.

The Leo Re Ltd. private sidecar transactions are arranged on behalf of one of the pension funds administered by Dutch pension fund manager PGGM, the PFZW fund.

All of the sidecar deals have involved a private ILS transaction between PGGM and reinsurance giant Munich Re, as the investor secures its own terms to access Munich Re’s annual sidecar issues.

PGGM first used the Leo Re special purpose insurer (SPI) to arrange a private quota share or sidecar transaction with Munich Re for 2017, when a $200 million sidecar arrangement was issued.

The pension fund manager then doubled the size of the arrangement for 2018, backing Munich Re’s underwriting to the tune of $400 million, through a $260 million Class A tranche and $140 million Class B tranche of notes.

Then, for 2019, we saw the first $20 million tranche of Series 2019-1 Class A notes issued by Leo Re back in December.

Now, the overall 2019 private sidecar arrangement between PGGM and Munich Re has increased to $400 million, thanks to this issuance of $380 million Leo Re Series 2019-1 Class B notes. At $400 million the arrangement is the same size as seen for 2018.

The $380 million of Series 2019-1 Class B Participating Notes issued by Leo Re Ltd. are due for final maturity at March 22nd 2023, the same date as the recently issued Class A 2019-1 notes.

As usual, we assume the notes are mainly exposed to U.S. property catastrophe insurance risks.

We assume PGGM has funded the Leo Re reinsurance sidecar for 2019 on behalf of the PFZW pension fund, as with the other issues. This pension fund invests across the insurance-linked securities (ILS) spectrum through allocations to ILS fund managers and increasingly more directly, such as by using Leo Re, with all of its allocations managed by the ILS team at PGGM.

PFZW also invests in ILS funds from insurance-linked investment specialist managers Fermat Capital Management, Nephila Capital, LGT, Elementum Advisors, AlphaCat Managers and New Ocean Capital Management.

PGGM has in the past had as much as $4.6 billion allocated to the ILS and reinsurance linked asset class on behalf of the pension fund it manages these allocations for.

As a private arrangement through its own vehicle, PGGM is able to privately negotiate terms of the sidecar and underlying quota share agreements, instead of allocating capital through Munich Re’s co-mingled sidecar vehicle Eden Re.

For more details on reinsurance sidecar transactions and investments view our list of collateralized reinsurance sidecars.

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