Peak Reinsurance Company Limited (Peak Re), the Hong Kong headquartered global reinsurer that is majority backed by Fosun International, has renewed its ground-breaking Asian sidecar transaction, with a $77 million Lion Rock Re II issuance.
The second fully collateralised reinsurance sidecar transaction from Peak Re saw the company upsizing the transaction slightly, from the $75 million seen a year ago, as a slice of its global property catastrophe reinsurance book was shared with high-quality global investors.
Peak Re had always said it was looking forward to expanding its relationship with the capital markets in the future and making continued use of Lion Rock Re vehicle to access third-party capital.
This renewal demonstrates that the reinsurer is committed to working with the ILS investors it has now established relationships with and building on that, leveraging the ILS investor appetite as an additional source of capital and retrocessional capacity within its business.
Peak Re has renewed the Lion Rock Re Ltd. sidecar with a $77 million issuance and sale of notes to investors for 2020, in a transaction dubbed Lion Rock Re II.
The company said that the investors have supported Lion Rock Re with an increase in capacity for 2020, which it says is, “testament to investors’ view that Lion Rock Re gives them access to a unique and high quality portfolio of reinsurance business.”
Lion Rock Re II will enter into an exclusive quota share retrocessional reinsurance arrangement with Peak Re, reinsuring part of the firms global property reinsurance portfolio.
Franz Josef Hahn, Chief Executive Officer of Peak Re, said that the upsized sidecar renewal demonstrates that Hong Kong can become a hub through which ILS investors can access risk.
“Following on from the steps we took in bringing Lion Rock Re to the industry, we are very pleased to be able to announce that investors have chosen to support us once again. We said that last year was a milestone for the reinsurance market in Hong Kong, but the confidence shown in Lion Rock Re II really shows that Hong Kong can become a hub for ILS investors.
“Lion Rock Re II will allow us to continue our drive towards modernising reinsurance and bringing more communities under the umbrella of protection that insurance and reinsurance provides,” Hahn explained.
Lawrence Cheng, Managing Director, Underwriting at Peak Re added, “Creating a sidecar has always been part of Peak Re’s long term strategy, and the trust shown by investors will allow us to continue to develop our relationships with ILS managers and investors as we go forward. The judicious allocation of risk to Lion Rock Re through 2019 certainly helped us to deliver returns for investors and we look forward to following this through in 2020.”
With Lion Rock Re II, Peak Re is benefiting from a source of efficient retrocessional capital, while investors are benefiting from a uniquely diversified global portfolio of reinsurance linked returns.
It will be interesting to see how Peak Re expands the Lion Rock Re sidecar program over time, as it could offer something very unique to ILS investors given its access to risk from China.
The Chinese market is seen as extremely attractive by ILS investors, given the breadth of catastrophe exposure and increasing penetration of insurance.
The capital markets clearly have a role to play in supporting the continued growth of the Chinese insurance market and Peak Re being in Hong Kong could play an interesting role as a conduit to for third-party capital to access it.
For details of many reinsurance sidecar investments and transactions over the history of the ILS market, view our comprehensive list of collateralized reinsurance sidecars transactions.