Swiss Re Insurance-Linked Fund Management

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PGGM in $20m Leo Re 2019 private sidecar transaction with Munich Re


Dutch pension fund manager PGGM has completed its first issuance of notes from its Leo Re Ltd. collateralised reinsurance sidecar for 2019, with a $20 million Series 2019-1 Class A tranche of notes issued which feature property catastrophe risk sourced from Munich Re.

The Leo Re Ltd. series of private sidecar transactions have all been issued on behalf of one of the pension funds administered by Dutch pension fund manager PGGM and have all involved a private ILS transaction between PGGM and reinsurance giant Munich Re.

PGGM first used the Leo Re special purpose insurer (SPI) to arrange a private quota share or sidecar transaction with Munich Re for 2017, when a $200 million sidecar arrangement was issued.

The pension fund manager then doubled the size of the arrangement for 2018, backing Munich Re’s underwriting to the tune of $400 million, through a $260 million Class A tranche and $140 million Class B tranche of notes.

For 2019 it seems that PGGM is starting off a little smaller, with Leo Re Ltd. issuing its smallest tranche of notes yet, a $20 million Series 2019-1 Class A tranche of participating notes. The notes have a due date of March 22nd, 2023.

The notes will be largely exposed to U.S. property catastrophe insurance risks.

We assume that again PGGM has funded the Leo Re reinsurance sidecar for 2019 on behalf of the PFZW pension fund, which invests across the insurance-linked securities (ILS) spectrum through allocations to ILS fund managers and increasingly more directly, such as by using Leo Re.

It’s relationship with Munich Re and the size of its investment fire power means the pension fund can get access to a private slice of the reinsurers portfolio, through these Leo Re private sidecar arrangements.

It means PGGM can privately negotiate the terms of the sidecar and quota share agreements, instead of allocating through Munich Re’s co-mingled sidecar vehicle Eden Re.

Taking the deal private and using its own vehicle Leo Re Ltd. means PGGM can have increased influence on the terms and scale of the ILS transaction, rather than allocating to the co-mingled sidecar investment vehicle.

It’s possible we’ll see more tranches from the Leo Re collateralised reinsurance sidecar before this renewal is completed.

PFZW also invests in ILS funds from insurance-linked investment specialist managers Fermat Capital Management, Nephila Capital, LGT, Elementum Advisors, AlphaCat Managers and New Ocean Capital Management.

PGGM has invested as much as $4.6 billion in ILS and reinsurance linked assets on behalf of the pension fund it manages these allocations for.

For more details on reinsurance sidecar transactions and investments view our list of collateralized reinsurance sidecars.

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