Structured Prospective Reinsurance Solutions

Swiss Re’s Structured Solutions team provide customisable reinsurance and capital market risk transfer solutions for all non-life risks.

We address our client's most pressing needs and motivations through tailored reinsurance solutions and capital structures. We select teams based on skill-sets that match the needs of our clients and draw on the entire product suite and technical capabilities of Swiss Re. Through rapid prototyping and continuous dialogue, we design the best solution for our clients' needs.

The market trend

Structured reinsurance enables insurers to address a wide range of needs. The main motivations for customised structures can be clustered into five broad categories:

Structured protection and risk transfer – These solutions increase the efficiency of insurance programs, expand the insurability of difficult-to-insure risks, and provide large amounts of capacity for catastrophic risks.

Corporate-finance driven – By optimising an insurer's capital structure we can achieve a broader set of financial objectives, for example, releasing trapped or redundant capital and/or lifting return on equity (ROE). Reinsurance can substitute for traditional capital and also reduce the cost of paid-in capital by reducing volatility.

Enabling strategy and growth – These solutions emphasise the dynamic benefits of reinsurance structures. Insurers and reinsurers partner to enable the long-term strategic objectives of the insurer. The relationship involves multi-year products and solutions focused on aligning the reinsurance program with the long-term strategic plans of the client.

Solutions mitigating regulatory changes Increasing numbers of countries and regions are migrating to more risk-based solvency regimes. The impact of new capital rules, including Solvency II for European insurers and the China Risk Oriented Solvency System (C-ROSS), can be significant. Reinsurance solutions can be used to mitigate the potential costs of regulatory changes.

Accounting International financial reporting standards are subject to changes and many countries have adopted and continue to adopt IFRS for their local financial reporting regimes. While accounting considerations per se are not drivers of reinsurance solutions, understanding potential ramifications and consequences for volatility and capital management is key.

The protection

Holistic risk management

More of our clients are optimising their balance sheets and their earnings power from a corporate and enterprise perspective. Smart combinations of business unit protections and corporate risk management or enterprise risk management solutions allow insurers and corporations to combine multiple risks and/or interdependent triggers. The payments reflect the joint losses from these risks, and the joint volatility is less than the sum of the volatility of the individual risks.

Typical products: Whole Account Stop Losses, Virtual Reinsurance Captives, Asset Liability & dual trigger structures, Aggregate Excess of Loss

Catastrophe risk & parametric solutions

These are large programs where the sheer size of risks is challenging. They usually involve panels of reinsurers and, increasingly, combine traditional programs with alternative capital like ILS. In some cases pay-outs are based on indices rather than actual losses. These structures are used to enhance insurability of difficult-to-insure risks, such as weather-related, commodity and non-damage business interruption risks.

Typical products: Structured Catastrophe Bonds, Insurance Linked Securities, Cascading Covers, Top & Drop Structured Covers

Solutions supporting capital efficiency and relief

Increasingly, reinsurance is being used in corporate capital management programs. The goals of such programs include enhancing capital returns and reducing capital costs, and can be achieved through, for example, non-life proportional covers, retrospective solutions and structured solvency relief covers.

Typical products: Structured Quota Shares, Enhanced Quota Shares, Combinations of Quota Share & LPTs/ADC's, Structured Solvency Covers

Mergers and acquisitions (M&A)

M&A are transformational situations which entail significant changes to funding and risk transfer needs. There is heightened investor scrutiny of the quality of the acquired portfolio, as well as execution risk on successfully integrating an acquired entity. Reinsurance solutions can be used to strengthen or relieve pressure on insurers’ balance sheets and earnings statements either as a preparatory step before a sale or in the aftermath of an acquisition.

Typical products: Structured Quota Shares, Enhanced Quota Shares, Combinations of Quota Share & LPTs/ADC's, Structured Solvency Covers

Solutions supporting growth plans

Most reinsurance solutions play a role in supporting an insurer's growth plans including expansion into new markets or the launch of new products. The growth initiatives require upfront funding or capital relief, but the reinsurance solutions package can also involve broader support, for example in managing market and regulatory risk or other expertise, and facilities such as carrier platforms.

Typical products: Advance Funding Quota Shares, Structured Quota Shares,