NEWS
PGGM SPI seeks ‘concentrated portfolio’ with blue chip insurers
Institutional investor continues to build out its SPI, Nightingale Re, delegates heard.
Alternative capital was a key theme at the Guy Carpenter Symposium in Baden-Baden, with SCOR chief executive officer Thierry Léger telling the audience that “everyone expects alternative capital to contribute to closing the gap between demand and offer”.
Léger told delegates that in the current market environment, opportunities for alternative solutions (structured solutions and alternative capital) were accelerating. Alternative capital coming into the market is projected to increase to $100 billion by the end of 2023, according to AM Best and Guy Carpenter, compared with $461 billion from traditional capital.
All eyes were on fellow keynote speaker Eveline Takken-Somers, senior investment manager of PGGM, an institutional investor in insurance-linked investments (ILI), who explained what such alternative capital providers want to see from the industry.
PGGM, an independent asset manager and pension fund service provider in the Netherlands, has a main client: PFZW, a Dutch pension fund for the healthcare and welfare sector servicing three million participants, with assets of €217 billion.
Explaining why PFZW invests in ILI, Takken-Somers said: “The insurance portfolio is less volatile than equity portfolios.
“It provides diversification to PFZW’s overall portfolio, an attractive risk profile, and strengthens homeowners and companies’ resilience and adaptive capacity to climate-related hazards and natural disasters.”
As an institutional investor in ILI since 2006, PGGM has had a dedicated allocation since 2010. PFZW has given the investor the exclusive mandate for ILI “which enables us to invest for the long term”, she said. The ILI net asset value is €8 billion, and the ILI return has been 6.3 percent per year since 2006.
“PMMG would focus on peak perils.”
Eveline Takken-Somers, PGGM
This year and beyond, she said, the ILI team would be “building out Nightingale Re”, its special purpose insurer (SPI) vehicle named after 19th century Crimean War nurse Florence Nightingale.
With large capital-intensive reinsurance transactions between $50 and $500 million, the SPI will have a very concentrated portfolio of transactions with blue chip insurance companies, she said. It will focus on cost, efficiency, transparency and control.
Outlining the ILI team’s philosophy, Takken-Somers said they wanted to build long term relationships with like-minded partners, focus on efficient implementations and proactively adapt to meet the changing demands of the reinsurance industry to remain an attractive and reliable partner.
PMMG would focus on peak perils because the reinsurance sector cannot diversify those sufficiently, while environmental, social and corporate governance (ESG) issues and climate change were important considerations.
Asked if she would consider moving away from short-tail nat cat into longer-tail risk, Takken-Somers said the organisation regularly revisits its investment “to see what kind of risks are out there, and so far, our board has not agreed to open up for other venture business”.
“For the board to consider other risks, they would need to see a clear risk premium, and understand if there was sufficient alignment of interest. Any move would need to be scalable,” she concluded.
Main image: Shutterstock / ?Russ Heinl
