Peak Reinsurance Company Limited (Peak Re), the Hong Kong headquartered, Fosun backed global reinsurer, aims to become the Asian leader in insurance-linked securities (ILS) with its acquisition of Lutece, while also benefiting from a new foothold in the Bermuda market, CEO Franz Josef Hahn explained to Artemis.
Peak Re announced yesterday that it will acquire 100% of the capital of specialist ILS investment fund manager Lutece Holdings Ltd. and its subsidiary Lutece Investment Management Ltd., in a transaction expected to close in the coming weeks.
Peak Re intends to utilise the Lutece platform to expand its own operations in insurance-linked securities (ILS) and reinsurance investing.
We spoke with Franz Josef Hahn, Chief Executive Officer of Peak Re, to understand the strategic rationale behind the move.
Hahn explained to us, “With the acquisition of Lutece, Peak Re will accelerate its ascent to becoming the Asian leader in the global ILS market by enhancing Peak Re’s ILS capabilities and expanding its ILS product suite.
“Peak Re has positioned itself as an ILS pioneer in Asia through the successful launch of Lion Rock Re I in 2018 and Lion Rock Re II in 2019, the first Asian reinsurance sidecar transactions.
“The acquisition of Lutece will not only accelerate Peak Re’s ILS strategy but also accelerate Peak Re’s development in the field of ILS by providing a dedicated platform for Peak Re to expand its (re)insurance securitisation capabilities and offerings, diversify its income source and finally create additional business opportunities.”
The acquisition of Lutece, which will now be renamed as Peak Capital, is also seen as platform for Peak Re to accelerate its long-term plans in ILS and connecting reinsurance with the capital markets, with an expansion of the existing Lutece strategies targeted.
“Lutece is currently known in the ILS market for operating a very specific and targeted retro strategy; however, going forward Lutece will provide Peak Re with a platform for expansion into other areas of the ILS market,” CEO Hahn said.
He explained that Peak Re has a number of goals in ILS, including an aim to become a leader in structuring risks for the capital markets and developing superior access to ILS capital.
In addition Peak Re wants to help expand available reinsurance capacity, leveraging the capital markets to support the insurance needs of the emerging middle class.
The long-term goal is to develop global ILS capabilities under the Peak Capital brand and a full suite of offerings, for cedents and investors.
We discussed the fact Lutece is a Bermuda based ILS operation and what that means to Peak Re, as this is the company’s first branch or unit based on the island.
“Peak Capital will be based in Bermuda,” Hahn told us. “Thanks to this acquisition, Peak Re will gain a foothold in the Bermuda market with its unrivalled access to certain segments of reinsurance distribution, helping Peak Re to expand into new and growing markets whilst retaining its core focus on the emerging middle class segment.”
This could be an important move for Peak Re and is positive for Bermuda as well, with a new international reinsurer now having a foothold on the island.
Hahn told us that it will be business as usual in terms of the team behind Peak Capital, as, “Lutece and its current team, is a complementary platform to Peak Re and will continue to be led by CEO Erik Manning, CFO Angus Ayliffe and CUO Julia Henderson, with Peak Re’s oversight and support.”
That means Peak Capital will be entering the market with an experienced team of structurers and underwriters, with existing relationships for the current Lutece product-set, now with expanded access to Asian markets for risk and investors as well, plus Peak Re’s support, resources and guidance to boot.
For Hahn, one of the ultimate goals with the new Peak Capital ILS business will be the connection of insurance and reinsurance risks from Asia with global capital market investors and the beneficial effect this could have on insurance penetration in the region.
“We see tremendous opportunities from the growing Asian risk exposures,” Hahn explained to us. “Lutece’s best-in-class professionals with unmatched ILS and structuring expertise, combined with Peak Re’s strong underwriting and operating platform, will create new opportunities for us to develop differentiated and innovative (re)insurance products to both our customers and investors, and eventually expedite our mission to closing the protection gap in Asia and in new regional markets.”