Swiss Re Insurance-Linked Fund Management

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No change to underwriting as Swiss Re’s ILS capital grows: Rüede


As third-party or alternative capital managed continues to grow for global reinsurance firm Swiss Re, the company is keen to stress that this doesn’t mean any changes to its underwriting approach and standards, Philipp Rüede told us.

philipp-ruede-swiss-reSwiss Re has big ambitions in ILS capital management, seeing it as a core discipline and one that it is steadily expanding now.

The reinsurance firm recently said that global property and casualty (P&C) insurance premiums will grow considerably over the next two decades, with a near doubling expected and climate risk seen as the major driver of this market expansion.

Which, perhaps, provides one piece of of additional clarity as to why efficient access to the capital markets is important for major global reinsurers at this point in time.

But Swiss Re’s ambitions extend beyond just leveraging capital market investor appetite for peak catastrophe risks, as for the company the partnership with its ILS investors is incredibly important.

Speaking with Artemis, Philipp Rüede, Head of Swiss Re’s Alternative Capital Partners (ACP) unit, explained the firms goals.

“Swiss Re has the ambition to be the leading franchise for Nat Cat risk. This of course starts with our leading client franchise and underwriting expertise, but to achieve this goal, it is also essential for Swiss Re to offer a best-in-class Alternative Capital platform to our third-party capital investors,” Rüede said.

Last year’s launch of its own ILS fund manager, Swiss Re Insurance-Linked Investment Management Ltd. and its first ILS fund, were foundational pieces of its expanding ambitions in ILS.

Rüede told us that, “The Core Nat Cat Fund is complementary to Swiss Re’s other hedging products thanks to its difference in scope and risk profile compared with the other products.

“As a result, the expansion gives more options and flexibility to our current and potential investors with different needs and requirements, allowing them to partner with and grow alongside us.”

Ensuring that Swiss Re is moving its ILS business forwards in the right way is very important to Rüede, with long-term partnerships and alignment seen as vital.

For a reinsurer at the scale of Swiss Re, the company has the luxury of being able to move forwards its ILS plans without rushing, so the company can ensure its activities in the space are beneficial to all sides, itself, its investors and importantly its ceding clients as well.

Swiss Re has been managing third-party investor capital within its Sector Re collateralised reinsurance sidecar vehicle for over a decade now, but the Core Nat Cat Fund is a much newer proposition.

Rüede explained that the new ILS fund may grow faster for a time, but that Sector Re still remains just as foundational part of Swiss Re’s alternative capital activities.

“Both platforms are key pillars in our hedging strategy. As the Core Nat Cat Fund platform starts from a smaller base and has only been launched very recently, we would expect that the overall growth will exceed the one of the sidecar. However, we believe they are highly complementary, and we are excited to grow both platforms in the long term,” he said.

Swiss Re keeps its alternative capital management activity separate to its hedging, so even though access to alternative capital has grown it isn’t changing the way the firm writes new risks.

Rüede said that, “Overall, the increased access to third-party capital has not changed our underwriting approach to the Nat Cat renewals as we write our business independently of our hedging portfolio.”

The partnership approach of working alongside major investors on ILS activities is likely to become an important one for Swiss Re.

The company launched its Viaduct Re sidecar relationship with the largest ILS end-investor PGGM in 2019, a relationship that grew in 2020 as well.

The first Viaduct Re transaction was focused on US natural catastrophe perils, while the 2020 arrangement was focused on worldwide treaty reinsurance business focused on natural catastrophe perils, showing that the relationship is already evolving to provide useful benefits to both sidecar sponsor and investor.

“These enable Swiss Re to grow our natural catastrophe book and to proactively manage our risk appetite,” Rüede said, adding that, “Having a long-term partner, such as PGGM which is a sophisticated player in this space and deeply understands the (re)insurance market and the value that Swiss Re’s strategy and approach brings is very gratifying and we are very excited about our partnership.”

As the alternative capital business at Swiss Re grows, more partnerships of this kind are likely to be entered into.

The reinsurer has the access to risk that large, institutional ILS investors are looking for and also the ability to service that risk in a way major investors may also appreciate.

The duration of partnerships is also likely to be long, when engaging with these large ILS investors, so for Swiss Re that is perhaps even more beneficial for how it can deliver capital to its range of underwriting teams for longer and consider these ILS structures a more permanent source of capacity.

“For us it is important to have long-term partners, who understand our approach and strategy and who can bring significant capital to the table. When a partner meets these criteria and looks for the same long-term objectives, we are of course open to engage,” Rüede commented.

Also read: Swiss Re aims for the “best integrated capital franchise” – Rüede.

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