Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

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


Global reinsurance firm Swiss Re continues to demonstrate its growing commitment to third-party sources of capital and insurance-linked securities (ILS), announcing this morning that it is launching a dedicated ILS fund, the Core Nat Cat Fund, so investors can participate in its natural catastrophe underwriting business.

swiss-re-building-logo-newSwiss Re has set up a new subsidiary called Swiss Re Insurance-Linked Investment Management Ltd. (SRILIM), which has now been authorised by FINMA to act as an asset manager for investment funds.

Swiss Re Insurance-Linked Investment Management Ltd. is setting up a dedicated and standalone ILS fund to begin, named the Core Nat Cat Fund, a strategy that will provide yet another route through which it is bringing investor capital into its natural catastrophe underwriting business.

Swiss Re notes this as an expansion of its third-party risk sharing platform, which also includes its reinsurance sidecar program and its growing Matterhorn Re catastrophe bond activity.

The reinsurer says this will further strengthen its “strategic partnership with third-party capital providers” something that has been steadily expanding over the last year.

Swiss Re Insurance-Linked Investment Management Ltd. is setting up a dedicated fund company named 1863 Fund Ltd., a Bermuda registered fund company, providing investors with a new route to access Swiss Re’s natural catastrophe underwriting business.

The Core Nat Cat Fund, which is just the first investment fund to be launched under 1863 Fund Ltd., marks the very first time Swiss Re has opened up access to its natural catastrophe reinsurance portfolio to institutional and designated professional investors through a permanent investment fund format.

Martin Bisping, CEO of Swiss Re Insurance-Linked Investment Management Ltd., commented on the news, “This new fund will open a unique opportunity for investors to invest in the same book of business as Swiss Re, benefitting from Swiss Re’s global reach, client access, risk knowledge and underwriting.”

John Dacey, Swiss Re’s Group Chief Financial Officer, added, “Swiss Re has laid out a clear pathway for its Alternative Capital Partners strategy. This allows for targeted growth of our natural catastrophe portfolio, while giving investors an attractive diversifying investment opportunity in an easily accessible format. With this new fund set up, we are broadening our partnership with alternative capital providers.”

The first fund launched will offer third-party investors an “easily accessible and widely accepted investment format to participate in a high-quality natural catastrophe portfolio underwritten by Swiss Re,” the company explained today.

Swiss Re explained that the move is in-line with its strategy to bring more third-party investors into its reinsurance underwriting business, aligned with its strategy to expand its natural catastrophe book.

Ever since the setting up of its Alternative Capital Partners unit, Swiss Re’s focus on third-party and alternative reinsurance capital has been growing.

The company told us earlier this year that its alternative capital assets under management had reached some $2.5 billion, strong growth from just about $1 billion at the start of 2019.

This is split across Swiss Re’s Sector Re quota share reinsurance sidecar vehicle, its direct partnerships with major investors, such as with PGGM through the Viaduct Re sidecar structure, other investor relationships and its internally managed cat bond and ILS securities portfolio.

Alongside Swiss Re’s expanding Matterhorn Re catastrophe bond program, which is in the progress of issuing its fifth catastrophe bond of the year at this time, the reinsurer is now heading for almost $1.5 billion of cat bond market supplied retrocession to add to this.

Now, with this first dedicated ILS fund strategy, Swiss Re is looking to expand further on its use of alternative capital, which in the currently hardening reinsurance market will help to support its continued growth into property catastrophe risks, while enabling the reinsurer to manage its probable maximum loss (PML) from any major catastrophe events.

Of course, this also aligns Swiss Re’s strategy with those of the many reinsurance firms that also tap into the capital markets through multiple vehicles such as sidecars and ILS funds, further establishing the ILS market as a permanent source of capital within global reinsurance and an increasing provider of support even to the largest reinsurer in the world.

As we also explained earlier this month, Swiss Re is exploring more permanent ways to bring third-party capital into its business model.

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