Swiss Re has announced the closing of a multi-year stop-loss transaction with JP Morgan and other institutional investors.
The $1.15bn transaction is aimed at covering underwriting risks across the entire Swiss Re group for the financial year 2022-2026.
The hybrid transaction, which combines bank financing and insurance-linked securities (ILS), will use the segregated account of the existing Matterhorn Re special purpose insurer vehicle.
Of the $1.15bn, US banking major JP Morgan will provide $1bn financing via a senior loan.
Institutional investors will contribute by investing in junior insurance-linked notes issued by the segregated account.
The funding will support Swiss Re’s growth opportunities in the reinsurance market and have a positive impact on the group’s capital requirements and ratings.
Swiss Re Group CFO John Dacey said: “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.
“With this transaction, the Alternative Capital Partners division delivers another material contribution to Swiss Re’s efficient capital management.”
The reinsurer noted that the transaction is fully collateralised and the proceeds will be held in the form of notes issued by the European Bank for Reconstruction and Development (EBRD).
Alternative Capital Partners was launched in 2019 by merging Swiss Re’s ILS and Retro & Syndication teams.
Swiss Re Alternative Capital Partners head Philipp Rüede said: “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. 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.”
Earlier this year, Swiss Re Insurance-Linked Investment Management raised $250m from Sweden-based Alecta.