Swiss Re Insurance-Linked Fund Management

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Swiss Re still seeking third-party capital support for Admin Re


Reinsurance firm Swiss Re is continuing to seek investment support for its Admin Re unit, with third-party capital providers an option it is open to, according to the reinsurers CEO Michel Liès.

In November Swiss Re announced that its discussions with Phoenix Group Holdings, on the proposed tie up between the Admin Re UK business and Phoenix, had been terminated as the parties could not come to a mutual agreement on the transaction.

That leaves Swiss Re back at the drawing board with respect to bringing a partner or some additional capital into the Admin Re business and the unit continues to drag on the reinsurers overall results.

According to the FT, citing Citigroup analyst Thomas Dorner, Admin Re’s return on equity is just 3%, compared to Swiss Re’s 9% across the group. Despite this Swiss Re does feel the unit can make a valuable contribution, CEO Michel Liès told the FT that he felt it was a complementary piece of the overall reinsurance business.

Liès said; “We are looking for third-party capital players who could, in the acquisition of a portfolio, participate in the acquisition, but are definitely depending on the quality of our platform.”

Admin Re deals in the assumption and management of closed books of life insurance business, an area which may not be all that attractive to traditional insurer partners but could be of interest to capital markets investors if an opportunity could be structured in the right way. Perhaps Swiss Re could look to structure Admin Re in such a way that a syndicate of third-party investors could invest in the business, perhaps as a fund structure, opening it up to the type of investors interested in insurance-linked securities.

Admin Re holds large amounts of mortality risk on its books, which could make it attractive to pension funds which hold large amounts of exposure to longevity risk perhaps. An investment in Admin Re would also be attractive to institutional investors who appreciate catastrophe risk, particularly with a reinsurer the size of Swiss Re providing the platform.

Liès told the FT that one of his priorities for Admin Re is concluding some transactions, even if Swiss Re has to finance this on its own. Concluding a transaction and showing that it can increase the return on equity of the Admin Re unit may be what is required to get firm interest from third-party capital providers.

It will be interesting to see what direction Swiss Re takes Admin Re in. As a closed book life portfolio it seems eminently suitable to turn into an investment opportunity for third-party capital and if Swiss Re achieved this it would become another attractive way to harness returns of the insurance market for investors.

Read our article from July: Swiss Re may leverage third-party capital in Admin Re unit.

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