Peak Re plans to reignite third-party capital business, partner with investors: CUO Hough

Peak Reinsurance Company (Peak Re), a global reinsurer headquartered in Hong Kong, has plans to “reignite” its third-party capital management business in 2027, seeing itself as having a differentiated offering for investors and wanting to become more sophisticated in the space, Chief Underwriting Officer Philip Hough told Artemis.

Recall that, Peak Re had been active in the insurance-linked securities (ILS) space as a manager of third-party capital a few years ago, having acquired a Bermuda-based platform previously named Lutece, but now named Peak Capital.

Speaking with us in an interview at the Monte Carlo Rendez-vous event, Hough explained that Peak Re’s third-party capital management unit, Peak Capital, remains licensed in Bermuda and ready to go.

The company has ambitions and plans underway to become more active again in the third-party capital management space, seeing partnerships with investors as a key way to grow its expanding global reinsurance business.

Hough explained to us, “We’re reigniting our third-party capital strategy right now. We talked about some growth initiatives, particularly around U.S. property, but also growing the existing books. Certainly the idea of matching some of that growth against external capital is definitely part of that initiative.

“But of course, to do that, you do need to build a track record. So that’s something where we’re kicking off once more. We are looking at potentially a small managed fund, but we don’t really have details that we can share with you at this point in time.

“Really, the idea of that would be to try and develop sidecar capacity to support some of that growth, and it could be across property, casualty, and specialty lines in due course.

“Property is probably the place to start, in terms of developing that momentum and that track record. For us the question around ILS is really, we have the Bermuda option but we’d love to do something in Hong Kong. That’s something I think will be a longer-term vision, but could really be a differentiator for us if we could do it locally. Bermuda, in the shorter term, is definitely an option.”

On Peak Capital, which remains licensed in Bermuda and could be activated again relatively quickly, Hough said, “We’re looking to reignite that business, if you like, hopefully at some stage of 2027. We are working to put together a plan for that right now.”

Hough believes Peak Re has a good story for third-party investors, given it offers access to risks in regions of the world where ILS is less prevalent today.

In addition, for Peak Re, access to third-party capital is seen as an important way to grow and diversify as well, while also protecting against peak zone exposures.

“In short, again early stages, but we do see third-party capital growth very much as a core pillar of our own growth ambitions over the next three to five years,” Hough told Artemis during the interview.

“For investors, we’re still a differentiated offering in terms of our European and Asia footprint. What we’d like that to become is a much more globally diversified portfolio of risk that can hopefully be attractive to investors. It’s certainly a core part of our strategy.”

Hough went on to say that investors are increasingly sophisticated in how they look at reinsurance and ILS as an asset class, while the way reinsurers can work with investors are also expanding.

He explained, “This idea of partnership, joint venturing, third-party capital is now much more embedded and integrated into our industry than maybe it was in the past.

“Investors in ILS were quite passive to begin with. You told them your story, they either bought into it or they didn’t. Whereas now, you really see investors showing quite an active interest in how you’re shaping your portfolio, how you’re reacting to market trends and conditions and there’s a lot more underwriting expertise now in third-party capital fund management.

“That’s positive, it really allows the opportunities to match risk against appropriate forms of capital. We’d like to become more sophisticated in that space. I think we’ve got a compelling growth ambition, and hopefully, we can find investors who can be attracted to that growth story.”

Finally, we discussed Peak Re’s activities in the catastrophe bond market, where it has been an active sponsor in recent years.

The company has sponsored two Black Kite Re catastrophe bonds so far and this remains another important component of the reinsurers strategy, as a way to access efficient and long-duration retrocessional protection, backed by the capital markets.

Hough noted the importance of the cat bonds and Peak Re’s intention to continue being a sponsor, “Catastrophe bonds are a good way of accessing alternative capital to support our growth plan over the next three to five years. We’re quite proud of the cat bond we sponsored most recently, we were able to bring India into that cat bond as well which I think was a great step forward.

“As we look to expand in the U.S. and continue to grow in regions like Europe, we’re also looking at Latin America. There seems to be growing appetite from investors into cat bonds outside of the peak perils. So that’s definitely something we’ll be looking at very closely as well, to just try to complete that landscape, if you like.”

Read all of our interviews with ILS market and reinsurance sector professionals here.