Swiss Re boosts loss protection with JP Morgan-led deal

13 March 2023

Swiss Re has closed a transaction with JP Morgan that will provide $US700 million ($1.1 billion) underwriting losses protection as it looks to alternative capital innovation to extend its ability to pursue reinsurance opportunities.

The financing follows a $US1.15 billion ($1.73 billion) hybrid arrangement concluded with JP Morgan in April last year, which was the first of its kind to combine bank financing and insurance-linked securities (ILS).

Swiss Re says the second multi-year stop-loss transaction provides protection for severe underwriting losses across the Swiss Re Group for the financial years through to 2027.

“This transaction with JP Morgan effectively provides Swiss Re with cost-efficient capital that can be deployed in the current attractive market,” Swiss Re Alternative Capital Partners Head Philipp Ruede said.

The deal represents another important step as the group increasingly uses alternative capital to address wider capital management needs, with the objective of lowering cost of equity, it says.

The transaction has been constructed with the potential to increase its size to $US1 billion ($1.5 billion) and is fully collateralised. The proceeds will be held in notes issued by the European Bank for Reconstruction and Development.

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