France headquartered globally active reinsurance firm SCOR has increased its third-party capital support in the first-quarter of 2022, taking the capital managed under its collateralised reinsurance sidecar platform to US $400 million.
SCOR has been leveraging third-party capital from investors more meaningfully in recent months, as it both de-risks its reinsurance book by reducing catastrophe exposures, while also managing the challenging retrocession marketplace.
That came as the company leveraged its third-party investor relationships to offset a reduction in available proportional and aggregate excess-of-loss retrocession capacity, resulting in increased sidecar capacity.
Part of that expansion of the sidecar platform was the $200 million investment made by Swedish pension fund Alecta into SCOR’s new Atlas Gotland Worldwide Catastrophe Sidecar, part of a newly formed SPI named Atlas Re Limited.
So SCOR is using more third-party capital to support its retrocession needs and to manage the rising costs of retro protection, in quota share collateralised reinsurance sidecar formats, suggesting more risk transferred in insurance-linked securities (ILS) formats to third-party investors or ILS funds.
That trend has continued through the first-quarter of the year, with SCOR revealing this morning that its sidecar capacity has risen by a further US $100 million to reach $400 million by the end of the first-quarter of 2022.
The reinsurer highlighted its now “strengthened partnerships with alternative capital providers” that helped to deliver the increased reinsurance sidecar capacity.
This increase in retrocessional protection from the capital markets, through its sidecar platform, has been a key lever for SCOR’s reduction in natural catastrophe exposures, it appears.
The reinsurer now expects to reduce its catastrophe PML’s by 15% year-on-year by the end of 2022, which is up from the 11% reduction in catastrophe PML it had forecast after the January renewals.
After a few years of shrinking sidecars, the big reinsurance firms appear to be placing more emphasis on them again, stimulated by the more challenged and capacity-poor retrocession marketplace.
But, perhaps it’s also a realisation that investors still seek access to property catastrophe risk-linked returns and that for many large investors, a partnership with a leading reinsurance company is an ideal way to achieve this.