Swiss Re Insurance-Linked Fund Management

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PGGM adds private quota share with Swiss Re through Viaduct Re Ltd.


PGGM, the Dutch pension fund administrator and investment manager that has become the largest single source of assets in the insurance-linked securities (ILS) market, added a private quota share arrangement with reinsurance giant Swiss Re in 2019, using a special purpose insurer (SPI) named Viaduct Re Ltd.

pggm-logoLast month we reported that PGGM had made further progress in broadening the range of strategies that it allocates to in the ILS and reinsurance sector, lifting its overall ILS assets to around US $6.5 billion in 2019 and adding two new reinsurance partners in the process.

Now, it’s come to light that one of those reinsurance partners is Swiss Re, which has entered into a private quota share or sidecar like arrangement with PGGM, ceding some of its property catastrophe risks to the investors vehicle.

Viaduct Re Ltd. is a special purpose insurer (SPI) that was registered in Bermuda in June 2019.

The vehicle was established to act as a conduit for PGGM to allocate some of the pension fund capital it administers on behalf of the Dutch healthcare and social welfare sector’s PFZW pension to a quota share portfolio of risks ceded by Swiss Re.

The private arrangement allows PGGM to follow the fortunes of Swiss Re’s underwriting performance, providing it with another access point to global reinsurance linked returns through another of the market’s largest players.

Already PGGM has a private quota share sidecar like arrangement with another of the leading reinsurance firms Munich Re, in the Leo Re Ltd. vehicle.

This strategy of partnering with the largest reinsurance companies has served PGGM well, as it seeks to grow its assets to its target level, while securing access to the highest quality risks and also managing the fees it pays for this.

PGGM also has a rated reinsurance joint-venture vehicle that it established with RenaissanceRe, which has already reached roughly $1 billion in size after it increased its allocation to that vehicle in 2019.

The pension investor selects partners that have something to offer it, in terms of scale and access to the type of lower volatility catastrophe exposed reinsurance business it tends to prefer.

By entering into quota shares with the likes of Swiss Re, PGGM benefits from a stable source of reinsurance returns that is going to be there over the long-term as its strategy continues to develop.

While for Swiss Re, as well as PGGM’s other reinsurance partners, the access to efficient third-party capital from the largest investor in the ILS space is a beneficial source of capacity that can augment their own, while also earning them a level of fee income as well.

We assume the Viaduct Re transaction was entered into around the mid-year renewal season, given the SPI’s registration was in June.

PGGM has multiple access points to the reinsurance market through some of the industry’s premier firms.

The addition of a partnership with Swiss Re makes perfect sense, especially at a time when the Zurich-headquartered reinsurer has been increasing its appetite for working with third-party capital providers.

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