PGGM ILS assets surpass $9bn, builds-out mandates under Nightingale Re

PGGM, the Dutch pension investment manager that allocates the largest amount to the insurance-linked securities (ILS) market on behalf of end-client the Dutch pension PFZW, ended 2023 with just over US $9 billion in ILS assets under management, as a slight uplift in capital deployed in euro terms and currency rates lifted AUM to a new high in USD.

PGGM has built out more allocations through one of its more recently launched insurance-linked securities (ILS) initiatives, the Nightingale Re Ltd. private mandate vehicle.

Through Nightingale Re Ltd., PGGM aims to partner directly with those needing reinsurance capital, entering into private transactions that can be significant in size.

Having launched Nightingale Re in time for the 2022 underwriting year, by the end of 2023 PGGM’s insurance-linked investments team had made 11 investments using the structure.

Back at the mid-point of 2023, the PGGM ILS portfolio that is invested on behalf of Dutch pension fund PFZW had reached EUR 8.1bn, which was around US $8.8 billion at the time.

We now know that by the end of 2023, PGGM’s ILS allocation had grown a little further to EUR 8.2 billion, which at December 31st 2023 currency rates meant it was above US $9 billion for the first time ever, at $9.06 billion to be precise.

PGGM allocates to the ILS asset class via 13 relationships with ILS managers and reinsurance firms across catastrophe bonds, collateralized ILS and quota shares.

In recent years, the investor has also opted to branch out beyond just ILS manager allocations, in particular with its Vermeer Re joint-venture rated reinsurer and the newer Nightingale Re private mandate structure.

Vermeer has been one source of efficient growth for PGGM’s ILS allocations in recent years, as the more than $1 billion balance-sheet and rated reinsurance company provides a source of risk-linked returns with leverage embedded, meaning capital deployed through the vehicle can deliver more in premium and therefore return-potential.

PGGM has always been incredibly conscious of the need to deploy capital efficiently to the space and Nightingale is now allowing its experienced insurance-linked investment team to partner more directly with insurers in the sector, including those that may not have worked directly with ILS investors before.

PGGM is looking to build long-term partnerships with cedents through Nightingale Re, while the strategy offers reinstatements and other features that afford flexibility and align it with cedents other reinsurance buys.

From 2006 up to the mid-point of 2023, the PGGM ILS portfolio had delivered a 6.3% return per-annum, a figure that has likely risen with the full-year performance from last year included.

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