PGGM ILS portfolio at ~$8.2bn, as Aeolus, SCOR & Nightingale Re added

PGGM, the Dutch pension fund investment manager that continues to be the largest single investor in the insurance-linked securities (ILS) market, increased its ILS portfolio to roughly US $8.2 billion, while adding new mandates with Aeolus, SCOR and a managed account structure named Nightingale Re.

PGGM’s ILS portfolio reached EUR 7.2 billion at the end of 2021, at which time the US dollar conversion would have been close to US $8.2 billion.

That’s up by just over 9% from the roughly US $7.5 billion of ILS assets PGGM had invested in at the end of 2020, as the pension investors continues to deploy capital into the insurance-linked securities (ILS) and reinsurance sector.

It’s notable though, that this remains below the upper-end target for PGGM’s Insurance Linked Investments mandate (ILI), which, as a percentage of the overall pension investment portfolio, it has the potential to grow to around EUR 10 billion, if it chose and if market conditions allowed.

PGGM has a target return for its mandate to invest into insurance and reinsurance that seeks to achieve a net return equal to 4%, from its natural catastrophe focused strategy.

Helping PGGM expand its ILS allocation through 2021 were some brand new mandates that the pension investor entered into during the year.

The additional mandates are with collateralized reinsurance and retrocession specialist Aeolus Capital Management, French reinsurer SCOR and an unknown source private mandate vehicle named Nightingale Re Ltd.

The Aeolus Capital Management allocation is via the managers lower-risk Spire PF Fund investment strategy, that invests in US focused natural catastrophe reinsurance risks.

The Aeolus Spire mandate is pegged at between EUR 100m to EUR 250m, although it’s not clear how much of that has been allocated at this time.

PGGM has allocated to a vehicle named Concordia Re Ltd. that enables the pension investor to allocate to worldwide catastrophe reinsurance alongside leading global reinsurer SCOR.

PGGM has a number of large investment with leading reinsurance companies, so adding a partnership with SCOR makes sense, especially when that reinsurer has been expanding its quota share sidecar arrangements in the last year.

The Concordia Re allocation with SCOR is sized at between EUR 50m and EUR 100m.

The final new mandate is via a Bermuda based special purpose insurer (SPI) and segregated accounts company named Nightingale Re Ltd., which itself transacts with a range of entities, perhaps other ILS managers or reinsurers.

It appears Nightingale Re may be an example of PGGM adding a vehicle to provide capital to ILS funds or reinsurance entities on its own terms, through a structure that can act as its own managed account and in which it can co-mingle risk investment opportunities with a range of sources or originators behind them.

The Nightingale Re allocation is described as a “managed account platform” and is also natural catastrophe risk focused, with a target allocation of between EUR 50m and EUR 100m currently.

PGGM’s other ILS and reinsurance investment mandates all remain intact, with little evident changes, although no doubt allocations will have fluctuated as the team there try to deploy capital in the most effective manner to suit the market opportunity.

The other allocations remain: 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.

There has only been one change in target allocation range, with the PGGM target for the RenRe managed Vermeer Re rated reinsurance company now being between EUR 1 billion and EUR 2.5 billion.

Other target allocation sizes remain the same as last year’s.

So, now with 13 ILS allocations, one of which now appearing to host multiple potential counterparty locations to deploy capital (Nightingale Re), PGGM continues to build out its partnerships with leading underwriters of natural catastrophe reinsurance risks.

With the new allocations and the expanded potential size for the Vermeer Re allocation, PGGM now has the options to achieve its upper-targets for how much money to deploy into the insurance-linked securities (ILS) sector, dependent on market conditions being conducive of course.

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