Swiss Re registers 1863 Re as an SPI in Bermuda for its ILS fund venture

Swiss Re, the global reinsurance company, has registered a special purpose insurer (SPI) in Bermuda which will presumably act as an underwriting vehicle for its recently established dedicated ILS fund, the Core Nat Cat Fund under 1863 Fund Ltd.

The Bermuda domiciled special purpose insurer (SPI) is named 1863 Re Ltd. and had its registration confirmed by the Bermuda Monetary Authority (BMA) in November.

Swiss Re announced at the end of that month that it has set up a new subsidiary called Swiss Re Insurance-Linked Investment Management Ltd. (SRILIM), which will act as an asset manager for investment funds.

Under the investment management company, Swiss Re has established a dedicated and standalone ILS fund to begin operations, with the Core Nat Cat Fund the first offering under 1863 Fund Ltd., a Bermuda registered fund company the reinsurer has also set up.

That first ILS strategy will provide third-party investors with a way to access the returns of Swiss Re’s natural catastrophe reinsurance underwriting business.

At the same time as registering 1863 Fund Ltd., it seems the SPI vehicle 1863 Re Ltd. was also established for Swiss Re, with the pair’s registration numbers coming one before the other.

That suggests 1863 Re Ltd. will be the collateralised reinsurance underwriting vehicle and transformer through which risks will be made available to the new 1863 Fund and its sub-strategy the Core Nat Cat Fund.

Swiss Re confirmed this with us today, saying that the Core Nat Cat Fund will invest into an SPI called 1863 Re Ltd., which is a collateralized reinsurance company that will provide retrocession coverage to Swiss Re.

SPI’s are commonly used by ILS fund managers as underwriting vehicles for writing fully collateralised reinsurance business, or to act as transformers for bringing reinsurance risks into investment funds.

It appears Swiss Re has built out its new ILS fund management infrastructure similarly, with a focus on Bermuda as the home for its regulated underwriting as well as fund management structures.

While set to provide retrocession to Swiss Re, this new SPI structure will also give Swiss Re the flexibility to offer fully-collateralised coverage to clients and to write direct collateralised reinsurance, should it ever choose to. Which would seem unlikely to be all that advantageous given its strong balance-sheet, but in certain circumstances could add an element of financial flexibility to its offering.

Also read: Swiss Re sets up its first ILS fund, the Core Nat Cat Fund under 1863 Fund Ltd.