Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Usual suspects look to fill fronting gap left by acquisition of TMR


The gap in terms of fronting services for collateralised and ILS markets left by the acquisition of Tokio Millennium Re by Bermudian reinsurer RenaissanceRe is being filled we’re told, as the usual suspects look to take on any of that business they find attractive.

We’ve been told that a number of players have been out looking to scoop up some of the collateralised reinsurance fronting work that Tokio Millennium Re (TMR) had been servicing for insurance-linked securities (ILS) funds and investors, although the two main providers of this service, Allianz and Hannover Re, are expected to take most of the attractive opportunities we understand.

When the acquisition was announced, RenRe made it clear that the provision of this fronting service to other collateralised and ILS markets was not a business line it would be continuing once it had completed the integration of TMR.

However, continuity would be offered to in-force arrangements to ensure continuity for business partners and collateralised markets, RenRe had said.

CEO of RenRe Kevin O’Donnell explained at the time that the acquisition, “Includes the TMR fronting business, which is a very different business to our third-party ventures business. As part of the transaction we have an agreement with Tokio Marine Group to continue to provide their capacity until 2021, allowing us to provide continuity to the fronting businesses cedants.”

However, we understand that new fronting transactions would not be entered into, leaving a gap in the market and a number of ILS funds and investors that relied on the TMR fronting offering looking for a replacement in time for the January renewal.

We understand that Allianz, through its Allianz Risk Transfer (ART) unit and the Capital Solutions team, is one of those that has looked to scoop up any new fronting business opportunities that emerge due to the acquisition of TMR.

Allianz ART already works closely with some collateralised markets on fronting for reinsurance transactions, so expanding this makes perfect sense given the insurers global reach and significant network.

We’re told that the insurer has the appetite to take on more fronting business, but is likely to be selective and would only be a contender to take on some of the business left without a home after TMR stops providing its fronting offering.

We’re also told that Hannover Re is likely to benefit from TMR exiting the fronting space as well, given it too is also one of the largest providers of fronting services to ILS funds and collateralised reinsurance markets.

But again, Hannover Re is likely to also be selective and only choose the business that suits its appetite at this time.

We have also been told that other Bermudian reinsurers have been tentatively discussing the potential to offer some fronting services to ILS funds or investors they already work with, likely having spotted a potential opportunity to deepen those relationships and take advantage of the fronting gap left after TMR is acquired.

However, we are told that most inbound enquiries are being routed to the two main providers, Allianz and Hannover Re.

So it seems most collateralised markets that used the fronting services of TMR will be able to find a new partner to help them offer continuity to the cedants they transacted with.

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