PGGM ILS mandate scope for Nephila, PartnerRe & Swiss Re upsized

PGGM, the Dutch pension fund administrator and investment manager and the largest single source of assets in the insurance-linked securities (ILS) market, has significantly increased its mandated allocation allowances for some of its leading invetsment partners in the ILS and reinsurance sector.

With, we understand, roughly US $7.5 billion of investments into the ILS and reinsurance market, both through dedicated ILS fund managers and direct partnerships with reinsurers, PGGM continues to be expansive in the space, and further expansion is possible this year.

PGGM invests in the ILS and reinsurance asset class on behalf of one of the pensions it administers, the Dutch healthcare and social welfare sector’s PFZW pension.

According to the latest end of year disclosures from PFZW, the potential allocation sizes to three of the leading ILS investment partners have been at least doubled.

PGGM, on behalf of PFZW, invests in ILS and reinsurance with ten managers or reinsurers.

These are: AlphaCat Managers through its Soteria Fund; AXA XL through the Daedalus Re vehicle; Elementum Advisors through the Theia Catastrophe Fund; Fermat Capital Management through a catastrophe bond managed account; LGT ILS Partners through the LGT (Lux) Urania ILS Fund; Munich Re through the Leo Re private quota share sidecar; Nephila Capital through the Tyche Catastrophe Fund; PartnerRe through the Huygens vehicle; RenaissanceRe through the Vermeer Re rated reinsurance joint-venture vehicle; and Swiss Re through the Viaduct Re sidecar structure.

Each year, PFZW discloses its external investment manager list and also a range for each allocation to them.

In the latest information, as of the end of 2020, the allocation amounts for Nephila Capital, PartnerRe and Swiss Re have all been at least doubled.

The target allocation size for PGGM’s investment with Nephila Capital into its Tyche Catastrophe Fund was between EUR 250 million to EUR 500 million at the end of 2019, but has now been lifted to between EUR 500 million and EUR 1 billion.

The target allocation size of PGGM’s Huygens ILS investment through PartnerRe was between EUR 50 million and EUR 100 million at the end of 2019, but has been increased to EUR 100 million to EUR 250 million.

Finally, the target allocation for PGGM’s Swiss Re (Viaduct Re sidecar) deployment was between EUR 100 million and EUR 250 million, but this has now increased significantly to from EUR 500 million to EUR 1 billion.

The other seven mandates for ILS market deployments all remain the same, as detailed below.

The Fermat Capital Management catastrophe bond deployment is the longest-standing investment by PGGM in ILS and remains at between EUR 1 billion to as much as EUR 2.5 billion.

The AlphaCat, Elementum, AXA XL and Vermeer Re (RenRe) allocations are all in the EUR 500 million to EUR 1 billion range.

The Munich Re (Eden Re) ILS deployment ranges from EUR 250 million to EUR 500 million.

Finally, the LGT ILS Partners deployment is still from EUR 50 million to EUR 100 million.

PGGM maintains a target, as a percentage of its total assets, for its ILS and reinsurance allocations and this has increased.

It used to stand at 2.5% of assets, but we understand this has increased this year to 2.7%, suggesting the need for more room in some of its allocation allowances, perhaps driving the upsizing of these ranges.

The lifting of the scope of allocations through three of its managers gives the pension manager plenty of room to increase its ILS allocations should it desire to this year, while still maintaining an optimal balance across the access points to reinsurance it has created.

PGGM remains the largest single investor listed in our directory of pension funds and sovereign wealth funds investing in ILS and reinsurance.