PGGM / PFZW ILS allocation range increased for Munich Re sidecar Leo Re

The target allocation range has been increased for a Munich Re sidecar investment that features in the giant insurance-linked securities (ILS) portfolio managed by PGGM, the Dutch pension fund investment manager, on behalf of its end-client the Dutch pension PFZW.

The client pension that funds the investments into insurance-linked securities (ILS) made by the PGGM team, PFZW, discloses target allocation ranges for each of its ILS investments and at the latest update only one of them has been adjusted.

In the last disclosure made by PFZW, the pension fund’s ILS portfolio was reported at EUR 7.693 billion, which at that date of June 30th 2024 was equivalent to just under US $8.24 billion.

That accounts for 3.2% of PFZW’s assets at the mid-year point, which was stable with the end of 2023.

Across the whole insurance-linked securities (ILS) allocation, there remains a target of between EUR 5 billion and EUR 10 billion, so it remains within this targeted range.

While PFZW hopes to achieve a return of 4% above the risk free rate over a long-term investment horizon from its allocation to the ILS and reinsurance market.

The company has a broad range of allocations to ILS funds, reinsurance sidecars and other joint-venture vehicles in the reinsurance market and at the latest update from PFZW there has been no change to the allocation target ranges for the following investments (as of June 30th 2024):

Fermat Capital Management. Managed account. Catastrophe bond allocation. Target: EUR 1bn – 2.5bn.
Nephila Capital. Tyche Catastrophe Fund. Private contracts. Target: EUR 500m – 1bn.
Elementum Advisors. Theia Catastrophe Fund. Private contracts Target: EUR 250m – 500m.
AlphaCat Managers. Soteria Fund. Private contracts. Target: EUR 50m – 250m.
New Ocean (AXA XL ILS). Daedalus I Fund.Private contracts. Target: EUR 500m – 1bn.
RenaissanceRe. Vermeer Re. Private contracts. Target: EUR 1bn – 2.5bn.
PartnerRe. Huygens. Private contracts. Target: EUR 50m – 250m.
Swiss Re. Viaduct Re. Private contracts. Target: EUR 500m – 1bn.
SCOR. Concordia Re. Private contracts. Target: EUR 50m – 250m.
Aeolus Capital Management. Spire PF Fund. Target: EUR 250m – 500m.
Nightingale Re. Private contracts. Target: EUR 250m – 500m.
Integral ILS. Riemann Fund. Private contracts. Target: EUR 50m – 250m.

The only allocation target that has been increased as of the June 30th 2024 reporting by PFZW, is its allocation to the Leo Re quota share sidecar structure that is managed by reinsurance giant Munich Re.

The target allocation range for the Leo Re sidecar investment had sat at between EUR 250 million and EUR 500 million through 2022 and 2023, into early 2024.

But, as of the middle of this year, the target allocation range for Munich Re’s Leo Re sidecar vehicle has now been doubled to between EUR 500 million and EUR 1 billion.

It’s important to note, that while this implies the allocation has increased above the EUR 500 million level, it does not necessarily mean significant growth. It’s more a case of PFZW allowing for the allocation to rise over time, should it deem it conducive to put more of its overall ILS allocation towards that structure.

These allocation ranges tend to be adjusted over-time, as PGGM and PFZW identify the optimal portfolio mix across its range of ILS and reinsurance market allocations.

PGGM remains the largest single investor listed in our directory of pension funds and sovereign wealth funds investing in ILS and reinsurance.