How Swiss Re Structured Solutions support clients
In 2019 Swiss Re helped 160 P&C clients in 35 countries release USD 1.8bn of capital through structured reinsurance solutions.
Case study: Volatility Protection & Portfolio Transparency
A medium-sized insurer with a balanced book of business (life and non-life) had a history of volatile results in non-life lines. The company was negatively impacted by the financial crisis and was struggling to meet profitability targets. The insurer sought to reduce volatility of the non-life business, optimise its reinsurance costs and protect against a deteriorating combined ratio.
Swiss Re provided a multi-line, multi-year aggregate excess loss cover. The effectiveness of the structure was supported by extensive risk modelling. This resulted in the reduction of the volatility of the combined ratio, reducing earnings volatility.
The insurer benefited from internal diversification, stable reinsurance capacity and more budget certainty.
Case study: Supporting Growth
Acquisition-led growth was part of our client’s short-to-medium-term strategy. Any acquisition was to be funded through a combination of debt and existing excess capital – avoiding the dilution of stock.
Our client wanted to increase capital more than the targeted capital adequacy ratio (from a rating and regulatory perspective). It needed a flexible solution with minimal upfront costs, one that could be accessed at short notice and without distracting management resources during the due diligence of M&A activity. The cost-efficient outcome increased capital through a quota share.
The bespoke reinsurance structure kicked in automatically on closing of the acquisition, without further design or negotiations. The dynamic cession rate stabilised the solvency ratio and responded automatically to an actual “hit” to the available statutory capital base following the acquisition, which was particularly valuable because any goodwill paid reduced the regulatory capital base.
Upfront expenses were minimal because the quota shared started with a minimum cession rate, then stepped up as and when more capacity was needed. Management was able to focus resources fully on the acquisition target, and to consider additional safeguards for the acquired portfolio only if needed.
Case study: Capital Relief
An insurer with a well-established business in both Life & Health and Property & Casualty was subject to the Standard Formula under Solvency II in the transition period to prepare for regulatory approval. Capital was needed at the group level to finance new ventures. The insurer wanted to grow its life business.
By reducing the capital requirement for its general insurance portfolio, it wanted to free up capital to be able to allocate more resources to different areas such as the life book. Swiss Re developed a unique retrospective and prospective structure enabling seamless coverage across all years of retrospective and prospective business.
The structure enabled the provision of stable capital relief over many years, as the capital relief of the retrospective LPT cover on the client’s reserves alone would decline over time.
The solution provided the client with full operational and claims handling control on their Property & Casualty book, while at the same time financing the desired growth in the life book.