Asset management giant PIMCO (Pacific Investment Management Company LLC) and owner Allianz S.E. are set to partner on a new insurance-linked securities (ILS) operation, which as we revealed recently is set to be run by Rick Pagnani.
PIMCO is a world leading fixed income investor with a huge $1.72 trillion of assets under management, with access to an investor base the likes of which has not been unleashed on the ILS market before.
Allianz, meanwhile, is one of the largest insurance and reinsurance companies on the planet, with access to risk that is as good as any other underwriting house and an ability to originate risks for the pairs ILS investment initiative.
PIMCO said today that ILS is a “strategically important asset class for PIMCO’s broader alternatives platform,” a platform with more than $34 billion of assets under management currently.
PIMCO also revealed today that the ILS operations will be a partnership with re/insurer Allianz, with the company set to source global catastrophe risk in the form of collateralized reinsurance and other structured ILS investments for PIMCO’s investment strategies.
The firms said they will maintain independent underwriting and portfolio construction procedures, saying that this approach which they call differentiated will give the asset manager PIMCO “the flexibility to source risk from the open market in an effort to deliver attractive risk-adjusted returns for clients.”
“We are excited to enter the insurance-linked securities market at a time when volatility has become a mainstay of financial markets and clients want to diversify their investments,” commented Emmanuel Roman, PIMCO’s Chief Executive Officer. “Partnering with Allianz will give PIMCO access to a diversified portfolio of global catastrophe risk and the ability to leverage the robust capabilities of a premier global insurance group in our effort to deliver attractive risk-adjusted returns for clients.”
“We believe that this partnership of PIMCO and Allianz truly leverages the strengths of both companies,” added Amer Ahmed, CEO of Allianz Re. “With PIMCO we have a partner with access to an investor base that can provide the capital for which Allianz can supply insurance risks, both traditional catastrophe exposure risks and over time other risk classes. At Allianz we are excited that this will enable us to expand our underwriting capacity and generate new fee-based income streams.”
The pair said that, alongside Allianz Re, Allianz Group’s corporate insurance carrier Allianz Global Corporate & Specialty will also support the PIMCO ILS business.
It will achieve this by providing access to its international underwriting network, as well as the deal structuring capabilities of its Capital Solutions team, a team that is already very experienced in working with ILS funds and investors.
Hence the PIMCO ILS business will have broad access not just to reinsurance or retrocession transactions, but also to placing its investor capital behind pools of primary risks it seems.
Rick Pagnani in his new role as Head of PIMCO’s ILS Business, will report to Nic Johnson, Managing Director and Portfolio Manager at the asset manager.Pagnani was most recently CEO of Mt. Logan Re Ltd., the collateralized reinsurance and sidecar-like vehicle of the Everest Re Group, a role he departed from at the end of May 2018.
PIMCO’s entry into the ILS market and the revelation that it will be partnered with Allianz for risk sourcing comes at an interesting time for the sector.
Origination and being able to guarantee your investors prime access to risk is becoming increasingly important for ILS investment houses, as to is the ownership of that origination.
PIMCO partnered with Allianz presents a formidable strategic pairing that could bring significant sums of capital into the insurance and reinsurance market from capital markets investors. This at a time when some had been hoping that ILS interest might wane.
Initiatives like this suggest there is no sign of the flow of capital into reinsurance from third-party investors slowing any time soon.
It’s also worth noting that PIMCO was an investor in the ILS market in the past, with a significant catastrophe bond portfolio (compared to market size) as long ago as the early 2000’s.