PIMCO’s set-up of its insurance-linked securities (ILS) operations continues apace we can report, with infrastructure now in place including an ILS fund, into which capital has already been raised, as well as the registration of a reinsurance vehicle Newport Re Ltd.
PIMCO (Pacific Investment Management Company LLC), the $1.76 trillion asset manager arm of insurance giant Allianz S.E., launched the PIMCO ILS Business in January, announcing the appointment of Rick Pagnani to lead the new insurance-linked securities (ILS) operation.
Since then the company has been hiring key ILS team members, first adding Vijay Manghnani as Senior Vice President, ILS Risk & Analytics and Juan Prado as Senior Vice President, ILS Finance and Operations, followed by the addition of Michael Beck as Senior Vice President, ILS Portfolio Management.
Now, with the initial team in place which we suspect will grow further as the PIMCO ILS unit beginning to allocate capital to reinsurance deals and as it has a portfolio to manage, the focus has shifted to putting in place the infrastructure required to underwrite reinsurance risks and provide their returns to investors as ILS fund assets.
To this end, we’ve learned that PIMCO has now registered a Bermuda domiciled reinsurance vehicle named Newport Re Ltd.
Established in March at first, Newport Re Ltd. was then registered with the regulator in Bermuda during May and has been licensed as a Class 3B insurance and reinsurance vehicle.
A Class 3B re/insurer is described as a “large commercial” underwriting vehicle, expected to write more than $50 million of unrelated premium business, required to maintain capital and surpluse of $1 million and it’s also possible to get these vehicles rated as well, which suggests good flexibility going forwards for PIMCO as it builds out its ILS operations.
Newport Re Ltd. will presumably be used as a reinsurance underwriting vehicle for the PIMCO ILS team, writing business that will likely be fully-collateralized but could perhaps utilise a degree of leverage, if the rated reinsurance approach is chosen.
The PIMCO ILS team has also established an investment fund vehicle in the Cayman Islands, having registered the PIMCO ILS Series SPC as a mutual fund under the islands laws.
PIMCO has numerous investment funds registered in the Cayman’s, hence it’s not surprising to see its first ILS fund vehicle registered there.
Already the capital raising activities have begun and while we don’t have full visibility of the scale of this yet, the first capital has been attributed to the PIMCO ILS Series SPC fund vehicle with an initial $26 million raised for a segregated account portfolio within the fund structure.
We understand more capital has actually been raised than this, which we hope to be able to bring you news on when it becomes available, as this is just the first injection into the PIMCO ILS fund structure.
Having been established as a partnership between the asset management giant PIMCO and its owner insurance group Allianz S.E., the PIMCO ILS operations have what is perhaps unparalleled access to risk and also capital, given the depth of its investment portfolios and massive investor reach.
It’s going to be fascinating to watch how the operation develops and now with a reinsurance underwriting vehicle and ILS fund structure established the PIMCO ILS unit is ready for business.
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