France-headquartered global reinsurance firm SCOR has put in place a sidecar-like, quota share retrocession vehicle named Mangrove Insurance PCC Limited through which it transfers some of its longevity risk to third-party investors.
Mangrove Insurance PCC Limited is one of SCOR’s special purpose vehicles through which it taps the capital markets for retrocessional reinsurance capacity.
Mangrove only came to our attention recently and is particularly interesting, as it could be the first and perhaps only, longevity risk focused quota share sidecar vehicle in existence.
SCOR uses the Mangrove vehicle to reduce its exposure to longevity developments through the transfer of risk to external investors.
We’re told by sources that it wasn’t the established insurance-linked securities (ILS) funds that allocate to life insurance related risks who backed the Mangrove Insurance PCC sidecar like structure. Rather it is said to have been an investment bank, we’ve been told.
SCOR first entered into a quota share longevity retrocession agreement with Mangrove Insurance PCC Limited in late 2019.
That sourced the company a multi-year source of retrocessional reinsurance against adverse longevity developments.
This arrangement provides SCOR with retrocessional cover for longevity risks arising from nine existing in-force reinsurance treaties it has in place with clients in the United Kingdom, across a long risk period from October 1st 2019 until October 1st 2048.
That’s a very long transaction term for any insurance or reinsurance focused investor. However, it could be that the longevity retro sidecar structure renews or rolls over at defined intervals, perhaps enabling a degree of investor liquidity.
At the end of 2019, the share of retrocessionaires backing Mangrove Insurance PCC in its insurance and investment contract liabilities was EUR 152 million, a figure that rose to EUR 224 million by the end of 2020.
SCOR declined to comment or provide any further information on its innovative longevity retro sidecar arrangement through this Mangrove Insurance PCC vehicle.
But, it’s clear that this is yet another mechanism through which a global reinsurer like SCOR can tap into capital market investor appetite for returns from reinsurance business, alongside the more familiar property catastrophe arrangements that are used.
We expect to see an increasing use of capital market capacity to support longevity risks in time, especially as longevity risk transfer activity expands to more regions of the globe.
We’ve added the Mangrove Insurance PCC structure to our directory of collateralized reinsurance sidecars and quota share vehicles for its first transaction in December 2019. It is the only transaction or issuance listed that features longevity reinsurance as the exposure ceded.