Swiss Re has closed a $700 million multi-year stop-loss transaction with funding led by J.P. Morgan.

The financing builds upon an innovative hybrid transaction concluded with J.P. Morgan in April 2022, which was the first of its kind to combine bank financing and insurance-linked securities (ILS).

The stop-loss transaction provides protection for severe underwriting losses across the Swiss Re Group for the financial years 2023-2027. In addition to enabling Swiss Re to grow its business in favorable market conditions, the transaction is expected to have a positive benefit for Swiss Re’s regulatory and ratings capital requirements.

The transaction utilizes a newly established segregated account of the existing Matterhorn Re Ltd. special purpose insurer vehicle. The segregated account is financed via an initial $700 million facility supported by J.P. Morgan and its institutional investor base. The transaction has been structured with the potential to increase to $1 billion in size.

“This transaction with J.P. Morgan effectively provides Swiss Re with cost-efficient capital that can be deployed in the current attractive market,” commented Philipp RĂ¼ede, head of Swiss Re Alternative Capital Partners. “This deal also represents another important step on Swiss Re’s Alternative Capital Partners’ journey, where we are increasingly using alternative capital to address our wider capital management needs, with the objective of lowering Swiss Re’s cost of equity.”

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, all stable) ratings.

Swiss Re’s Alternative Capital Partners division encompasses Swiss Re’s sell-side ILS capabilities and its retrocession management, allowing the group to leverage a broad range of third-party capital as it grows its business. By doing so, Swiss Re is able to keep its exposures within clearly defined risk limits and improve the diversification of risk retained on its balance sheet.

Source: Swiss Re