Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

PartnerRe shifts ILS strategy from actively managed to quota shares


PartnerRe is making a change to its third-party reinsurance and ILS capital management strategy, moving away from running an actively managed insurance-linked securities (ILS) portfolio to a strategy focused on using quota shares to allow investors to participate in its reinsurance underwriting returns.

The executive team of PartnerRe has taken the decision to more closely align its third-party capital strategy with its long-term business strategy, through which it aims to deliver “relevant and impactful reinsurance solutions” to its clients, while continuing to provide third-party investors with a way to access returns aligned with its underwriting.

The change means no more actively managed ILS portfolios at PartnerRe, as a result of which two ILS focused employees, Edward Torres and Niraj Patel, are to leave the firm, a spokesperson explained.

PartnerRe now intends to focus on accessing third-party capital to support its quota shares through its established Lorenz Re collateralized reinsurance sidecar vehicle.

Additionally, PartnerRe intends to launch a new quota share investment fund offering, which will be distributed to investors through its SEC registered Mercalli Investment Management Inc. unit in the U.S.

The company spokesperson said that these quota shares would offer third-party investors attractive risk-adjusted returns, as demonstrated through the track record it has created in the ILS market through the Lorenz Re sidecar.

PartnerRe will stop offering collateralized reinsurance directly through its Mercalli Re vehicle, which was a retrocessional focused sidecar-like Bermuda domiciled special purpose insurer.

Additionally, PartnerRe will also stop actively managing a catastrophe bond portfolio, which the spokesperson said has performed well over the years but offers little in the way of direct benefits for the reinsurers’ clients.

The shift in strategy will see PartnerRe looking to leverage the efficiencies of ILS capital to benefit its own underwriting book, while offering aligned returns to a third-party investor base.

It seems this will maintain the firms interests in the capital markets, but ensure that the use of third-party capital is as an augmentation for its own underwriting capacity, rather than for management fee income alone.

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