PGGM / PFZW lift ILS allocation ranges for Swiss Re sidecar, Nightingale Re

Target allocation ranges have been adjusted for some of the investments that make up 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.

In particular, the target allocation ranges for the Swiss Re private sidecar structure Viaduct Re and private mandate vehicle Nightingale Re have both seen increases in recent months.

As we reported back in March, the PGGM managed insurance-linked securities (ILS) portfolio had grown to more than US $9 billion in ILS assets under management by the end of 2023.

At that time, we also knew was that the investor had been making increased use of the Nightingale Re Ltd. private mandate vehicle, through which PGGM aims to partner directly with cedents needing reinsurance capital, entering into private transactions that can be significant in size.

By the end of 2023 PGGM’s insurance-linked investments team had made 11 investments using the Nightingale Re structure.

But, now Artemis has learned from the latest disclosure made by PGGM’s client the Dutch pension fund for the care and healthcare sector PFZW, that the target allocation range has been increased for the Nightingale Re strategy from the EUR 50-250 million, that was set as recently as the middle of 2023, to now between EUR 250-500 million as of January 31st 2024.

Which implies the Nightingale Re strategy could double, or more, for PGGM and PFZW if they chose to, with scope to increase the amount of private collateralised reinsurance activity entered into using the Bermuda vehicle.

Another notable change, in the targeted allocation ranges, is for the Viaduct Re Ltd. private reinsurance sidecar arrangement between PGGM and Swiss Re.

We reported back in 2020 that PGGM had made a second investment into Viaduct Re, which meant private reinsurance sidecar arrangements between the investor and Swiss Re had reached over US $500 million in terms of size.

But now, the latest disclosure from pension PFZW, shows that the target allocation range for PGGM’s Viaduct Re arrangement has risen from the EUR 250-500m it had been set at back at the mid-point of 2023, to now between EUR 500 million to 1 billion as of January 31st.

Which again suggests scope to double the allocation, should it prove appealing and the market opportunity conducive to do so.

With these allocation target ranges, which PGGM / PFZW have set for each of the ILS managers and reinsurance partners they invest with, of course we don’t have specific visibility of just how large each allocation is.

But, when the target allocation range doubles, it suggests there has at least been growth in how much capital is being invested through that arrangement or ILS partnership, at least tipping it into the new bracket, as it becomes too large for the old.

For most of the rest of the PFZW ILS investments managed by PGGM, the target ranges remain static since 2023, to such industry names as Aeolus Capital Management, Fermat Capital Management, Nephila Capital, LGT ILS Partners, Elementum Advisors, Munich Re, AXA XL, rated reinsurer Vermeer Re, Partner Re and SCOR.

But, for the first time we have visibility of the allocation to a fund managed by Integral ILS, which is named the Riemann Fund and has an allocation target range of EUR 50-250 million set.

There is also one that has declined, which is a strategy that had been managed by AlphaCat, the Soteria Fund, which at June 2023 had been cited as having a target range of EUR 250-500 million, but now presumably being in run-off since the acquisition of Validus by RenRe, that target has dropped to EUR 50-250 million.

However, the overall ILS allocation scope remains within a range of EUR 5 billion to EUR 10 billion for PFZW, capping the potential across all of the different ILS strategies and reinsurer partnerships.

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.