Swiss Re has secured $1.15 billion in stop-loss cover that protects the entire group for severe underwriting-related losses over a five-year period. Swiss Re said the transaction supports its “growth opportunities in an attractive reinsurance market.”

Developed in partnership with J.P. Morgan and institutional investors, the “hybrid transaction” is the first of its kind to combine bank financing and insurance linked securities (ILS), said Swiss Re.

With this deal, Swiss Re has protection from severe underwriting losses for the financial years 2022-2026, thereby supporting growth opportunities in an attractive reinsurance market. Further, the transaction is expected to have a positive benefit for Swiss Re’s ratings and regulatory capital requirements.

“The innovative partnership is a great example of how the group considers all sources of capital holistically and aims to further enhance its flexible capital structure,” commented Swiss Re Group Chief Financial Officer John Dacey, in a statement. “With this transaction, the Alternative Capital Partners division delivers another material contribution to Swiss Re’s efficient capital management.”

The transaction utilizes a newly established segregated account of the existing Matterhorn Re Ltd., a special purpose insurer. J.P. Morgan provides $1 billion financing via a senior loan, while various institutional investors will participate via a $150 million investment in junior insurance-linked notes issued by the segregated account.

The transaction is fully collateralized, with the proceeds to be held in notes issued by the European Bank for Reconstruction and Development, which has Aaa/AAA/AAA (Moody’s/S&P/Fitch) ratings.

“Through Alternative Capital Partners’ expertise and strong relationships, we have been able to structure this first-of-its-kind hybrid transaction, bringing together bank financing and insurance-linked securities markets,” said Philipp RĂ¼ede, head of Swiss Re Alternative Capital Partners.

“In doing so, we have leveraged the complementary nature of the two sources of capital in a landmark transaction within the reinsurance and ILS markets,” he added.

Alternative Capital Partners was launched in 2019 by combining Swiss Re’s Insurance-Linked Securities (ILS) and Retro & Syndication teams. By leveraging the combined strength of both teams and building a unified center of expertise, Swiss Re said, it has become a key division supporting Swiss Re’s strategy and franchise.

Source: Swiss Re Group