The Ontario Teachers’ Pension Plan (OTPP) is a well-known investor in the insurance-linked securities and catastrophe bond space, having a dedicated manager for that portion of their investment portfolio. The largest single-profession pension plan in Canada, the OTPP has over $117 billion in assets and is considered forward-thinking in their use of alternative, or less mainstream, asset classes as a way to acquire diversification and achieve targeted returns.
As well as being an investor in ILS and cat bonds, which they interestingly manage in-house through their dedicated Portfolio Director for ILS, Philippe Trahan, the OTPP also invest in the insurance and reinsurance space via their equity investments.
You most likely read the news yesterday in the general reinsurance press about Flagstone Re finally completing the sale of their Lloyd’s of London operations to a subsidiary of ANV Holdings BV, a Dutch headquartered specialty reinsurance business. This acquisition has been in the offing for some time, but what’s interesting is the other announcement within a press release we received.
The press release states that “In connection with the transaction, Ontario Teachers’ Pension Plan has become the lead investor in ANV.” So through this acquisition of Flagstone Re’s Lloyd’s operations, OTPP have taken an opportunity to increase their stake in the reinsurance sector by becoming the largest backer of ANV.
“The acquisition marks an important step in the development of our business and we are delighted to welcome so many talented people to the ANV team,” said R. Matthew Fairfield, Founder and Chief Executive Officer of ANV. “I am also extremely pleased to have Ontario Teachers’ Pension Plan as a significant investor in our business as a result of this transaction.”
The Ontario Teachers’ Pension Plan clearly appreciate the returns it can achieve in the reinsurance space, along with the diversification it offers to their broader portfolio of assets. Not only are they interested in the capital markets backed side of the reinsurance market through cat bonds and ILS, but they are also showing their appetite for backing reinsurance equity plays as well. We wonder whether one day we could see investors such as OTPP copying the hedge funds and moving more aggressively into reinsurance by setting up dedicated sidecar or collateralized reinsurance operations as a way to deploy assets into the space efficiently while tapping reinsurance sized returns.