SCOR and Japan Post sign MOU on reinsurance investment structure

France headquartered global reinsurance company SCOR has signed a memorandum of understanding (MOU) with Japanese insurer Japan Post Insurance on the establishment of a reinsurance investment structure, which will feature subject business from both companies and be invested into by Japan Post Insurance.

Both companies have a track-record with risk sharing arrangements and investment vehicles focused on reinsurance opportunities, including sidecars.

SCOR has partnered with third-party capital on sidecars and other risk sharing arrangements for many years, while Japan Post Insurance has allocated capital to a number of reinsurance investment structures and sidecars as a way to diversify its business and generate insurance-linked returns.

In this case, the MOU has been signed regarding the retrocession of underwriting risks related to Postal Life Insurance Policies, which are policies reinsured by Japan Post Insurance from the Organization for Postal Savings, Postal Life Insurance and Post Office Network, to a reinsurance structure that SCOR will manage.

Japan Post Insurance will then also make an investment into the structure, under the MOU terms.

Japan Post Insurance only plans to hold less than 50% of the voting rights of the reinsurance vehicle. It’s not immediately clear if SCOR will therefore hold the majority, or whether other third-party capital providers could also participate.

SCOR is also set to invest in the reinsurance vehicle, which it will operate for risk management purposes and is intended to assume underwriting risks from both Japan Post Insurance and SCOR.

As a result, the reinsurance investment vehicle will provide both parties with risk diversification benefits, as well as a way to access new sources of returns.

The parties intend to continue discussions now on the details of the transaction, the investment in the reinsurance vehicle, and related matters, proceeding with the retrocession of life policies and the investments once all details are finalised and approvals received.

The details make the reinsurance investment structure appear like a sidecar of sorts, being planned to hold a defined and diversified portfolio from the two companies, potentially all life risks (although that is not immediately clear either), while providing them both a way to diversify their businesses and generate returns.