Swiss Re’s reinsurance sidecar investment platform is on-track to deliver impressive returns for 2023, with loss activity seemingly attritional up to August and higher rates set to boost performance, Philipp Rüede, Head of Swiss Re’s Alternative Capital Partners (ACP) unit told us in a recent interview.
Rüede spoke with us around this year’s Monte Carlo Reinsurance Rendez-vous event and explained that the collateralized reinsurance sidecar structures that Swiss Re operates are benefiting from the harder reinsurance landscape.
As a reminder, Swiss Re has the long-standing Sector Re sidecar structure, which is a multi-investor sidecar that takes a quota share of Swiss Re’s catastrophe reinsurance business.
The Sector Re sidecar has been close to $2 billion in size in the past, but is a structure that Swiss Re tends to flex with market conditions, as well as investor appetite.
The reinsurance firm also has a direct sidecar relationship with large ILS investor PGGM, the Viaduct Re vehicle, which had been grown to $500 million back in 2020.
During our interview, Rüede explained that, “Swiss Re’s sidecar returns have been attractive for its long-term partners as of August 11, 2023.”
The sidecars have not been without attritional loss impact, up to that date in August though, Rüede said.
“Earlier in the year, the program holders experienced some loss activity in New Zealand with floods and cyclone Gabrielle,” he explained.
But added that, despite this, “The current 2023 returns are looking to be in the ballpark of +20%.”
Rüede went on to say that, “Though still in the core U.S. and Japanese Typhoon season, which may affect returns, the program has performed well and has demonstrated the more remote nature of the underlying portfolio coupled with the higher possibility of returns as rates across the globe have hardened.”
Sidecars provide valuable retrocessional reinsurance capacity to ther sponsors, such as Swiss Re, while also offering it an opportunity to partner with investors and give them the opportunity to share in the performance of its natural catastrophe book.