Swiss Re Insurance-Linked Fund Management

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Swiss Re’s alternative capital assets managed near $2.5bn: Rüede


Swiss Re wants to become the “leading franchise for Nat Cat risks” and alternative reinsurance capital is set to be a key driver of this ambition at the major global re/insurer, according to Philipp Rüede, Head of the firms Alternative Capital Partners unit.

philipp-ruede-swiss-reAlternative reinsurance capital assets under management at global reinsurer Swiss Re have risen significantly over the last year and a half, Rüede told us, reaching almost $2.5 billion at this time thanks to expanding quota share sidecar activity.

Speaking with Artemis in a recent interview, Rüede explained that Swiss Re takes a partnership approach to its alternative reinsurance capital and insurance-linked securities (ILS) activities, placing great importance on alignment with the investors the company chooses to work with.

Rüede began by telling us how the Alternative Capital Partners strategy is developing, with the unit only having been founded in 2019.

“Alternative Capital is integral to Swiss Re’s strategy,” he said, “The foundation of Alternative Capital Partners (ACP) in 2019 with direct reporting line to our Group CFO is also testament of the importance we see in our partners and the focus on capital structure. It enables Swiss Re to manage its peak risk tolerances and supports the growth of Swiss Re’s client franchise.

“We follow a partnership approach with strong alignment of interest between our sidecar investors and Swiss Re.

“Further, we take pride that Swiss Re continues to act as a gateway for our insurance, corporate and government clients to access the ILS market. As historically the largest sponsor and one of the leading underwriters of catastrophe bonds we can provide our clients with a unique perspective on how to integrate ILS market capacity into their risk transfer programs.”

The founding of Alternative Capital Partners as a formalised unit to lead on activities such as Swiss Re’s sidecar cessions to investors has delivered returns it seems, with a significant increase in assets under management.

Swiss Re has been in the collateralised reinsurance sidecar market since 2007, with its Sector Re vehicle now a regular feature as a multi-investor, quota share ILS structure.

But more recently Swiss Re has also been developing direct partnerships with major investors as well, such as the growing relationship with Dutch pension investor PGGM through the Viaduct Re sidecar structure, a relationship which reached more than $500 million in terms of size, thanks to a second arrangement entered into recently.

That has helped to drive ILS assets under management much higher at Swiss Re over the last just over 18 months, Rüede explained to us.

“Since the beginning of 2019, Swiss Re’s alternative capital under management has grown from just over $1bn to almost $2.5bn. These figures include the internally managed cat bond portfolio together with the capital invested into the various products comprising our sidecar platform.”

We asked Rüede whether the ambition at Swiss Re is to continue growing these activities as market conditions allow.

He commented that, “With improving market conditions and Swiss Re’s positive growth outlook we expect to continue to grow and to be able to offer attractive opportunities for our partners to grow alongside us.

“Swiss Re has the ambition to be the leading franchise for Nat Cat risks. This of course starts by being a relevant partner for our clients and to grow alongside them. To achieve this goal, it is also essential for Swiss Re to offer a best-in-class Alternative Capital platform to our third-party capital investors as well as over time to cede new classes of risk.

“Finally, aligned with our broader mission to close the protection gap, we expect to be advising new diverse sponsors (such as governments or asset managers) on how to build strategic partnership with ILS investors.”

On the addition of a dedicated sidecar structure for major ILS investor PGGM, Rüede told us that this “is a natural continuation.”

“For us it is important to have long-term partners, who understand our approach and strategy. When a partner looks for the same long-term objectives, we are of course open to engage with them,” he said.

Swiss Re’s ambition to be the leading franchise for natural catastrophe risks has been evident for a number of years now, with the company expanding its writings at key renewals in-line with improving reinsurance rates.

Also demonstrating this has been the return to regular catastrophe bond issuance, through the relatively recently launched Matterhorn Re Ltd. series of cat bond transactions.

Rüede commented that, “Each of our hedging instruments has its advantages and disadvantages and we have increased both our cat bond and sidecar cessions in recent years. Important for us is to get the right balance within our overall hedging portfolio. One of the big advantages of cat bonds is that it allows us to improve the diversification of the overall Nat Cat portfolio by targeted reduction of our peak exposure (e.g. North Atlantic hurricane). ”

The expansion of the natural catastrophe appetite looks likely to persist as well, with reinsurance renewal rates having risen even more sharply through 2020 so far and the 2021 renewals also forecast to see further price increases.

“We see that the price environment in Nat Cat has improved and is improving. Of course, any further development will depend on many factors, such as loss activity, overall economy improvement, Covid-19 development etc.

“Swiss Re is strongly placed with its client franchise to take advantage of the improving conditions and share those returns with its partners,” Rüede said.

With more than $500 million of assets attributed to the PGGM sidecar partnership in Viaduct Re, it suggests Swiss Re’s Sector Re sidecar will have grown significant in 2020 so far, having reached almost $1.1 billion in the second-half of 2019.

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