Reinsurance sidecars news

Global reinsurer Swiss Re, which has been expanding its alternative reinsurance capital strategies in recent years, is seeing the “beginning of an influx” of capital into insurance-linked securities (ILS), something it believes will continued, Philipp Rüede, Head of the firms Alternative Capital Partners unit told us.

The much-discussed “flight to quality” of insurance-linked securities (ILS) investors is benefiting Munich Re through the support shown to its retrocession program, the company said today.

A number of insurance-linked securities (ILS) funds reported small losses related to business interruption claims from the Covid-19 pandemic in July, with quota shares the main source.

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.

Levels of third-party capital in the reinsurance market, across insurance-linked securities (ILS) funds, collateralised reinsurance structures and catastrophe bonds, are now down almost 10% from their high-point in 2018, according to the latest data from A.M. Best and Guy Carpenter.

Of the insurance-linked securities (ILS) related contracts and structures that are most at-risk of having collateral pre-emptively or otherwise trapped at year-end, rating agency A.M. Best believes all perils or non-U.S. property reinsurance or retro contracts and quota share sidecars are the most exposed to this.

The decline in available retrocessional reinsurance capacity is being exacerbated by ongoing fears over potential losses related to the COVID-19 coronavirus pandemic, on top of the added issue of pre-emptive trapping of collateralised ILS capacity, according to the rating agency.

According to reinsurance broker Guy Carpenter the amount of alternative capital in the market, across insurance-linked securities (ILS) funds, collateralised reinsurance structures and catastrophe bonds, shrank by approximately 2.7% in the first-half of this year.

After canvassing a number of insurance-linked securities (ILS) investment fund managers and end-investors for their views on possible loss impacts due to the COVID-19 pandemic, the majority strongly believe that impacts from the business interruption issue will only be minimal to their ILS strategies and ILS portfolios.

SiriusPoint, the new Class of 2020 international insurance and reinsurance firm being launched out of the coming together of Third Point Re and Sirius Group, sees ILS as “an option to consider” in terms of its capital use, CEO Sid Sankaran told us in an interview.