Swiss Re closes alternative capital transaction

Swiss Re has announced the closure of a multi-year stop-loss transaction, with financing ultimately provided by J.P. Morgan and various institutional investors. The transaction, which covers underwriting risks across the entire Swiss Re Group, is the first of its kind to combine both bank financing and insurance-linked securities.

Swiss Re’s Group chief financial officer 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 transaction utilises a newly-established segregated account of the existing Matterhorn Re Ltd. special purpose insurer vehicle. J.P. Morgan provides USD1 billion financing via a senior loan, while various institutional investors will participate via a USD150 million investment in junior insurance-linked notes issued by the segregated account.

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.