Schroders ILS CEO Lohmann mulls new $500m reinsurer as ILS appetite evolves

Industry veteran Dirk Lohmann, who now heads the insurance-linked securities (ILS) business of global asset management group Schroders, is exploring the possibility of launching a new reinsurer on Bermuda with a minimum of $500 million in capital.

Lohmann said that ILS investors are becoming increasingly sophisticated and are open to investing in new ILS asset classes for longer durations. The investment firm is exploring launching a rated reinsurer which takes the needs of some investors to a logical conclusion.

“We are looking at the possibility of creating something with permanent capital structure and a rated balance sheet which would allow us to manage a portfolio of risk in a way that allows for all the various risk appetites of the investors we work with,” he told Monte Carlo Today.

“It depends on an investor’s objectives. Some do not want to be investing in an operating business, but they like the returns. For others, this might be a natural evolution into the industry.”

Lohmann’s ILS unit has been called Schroder Secquaero since the former acquired 100 percent of Lohmann’s Secquaero business in July this year. He said that Schroders has “deep” relationships with a number of sovereign funds, several of which have invested in the reinsurance space previously.

“It is a question of looking at clients’ objectives and considering what we can deliver,” he said.

One possibility is that Schroders would play a central role in forming, managing and building a new reinsurer which would, over time, take on a life of its own with key functions moving in-house.

The team at Schroder Secquaero has the expertise to run a balance sheet reinsurer Lohmann was the chief executive of Converium and some recent hires have been made partly with this in mind. Stephan Ruoff, former CEO at Tokio Millennium Re (TMR), joined the company as deputy head in November; Beat Holliger, an experienced executive who has previously worked at reinsurance firms Munich Re and Swiss Re, also joined earlier this year.

“Stephan and I have both managed balance sheets in the past, and we have a well-resourced actuarial side and deep risk modelling capabilities,” Lohmann said. “We have a much broader set of capabilities than many ILS funds.”

The thought process behind launching a balance sheet reinsurer is part of a wider process of broadening the scope of risks the firm can offer ILS investors. It has also looked at ILS funds targeting the life re/insurance space, run-off, and opportunities in Lloyd’s.

“We are looking at this space very differently from the way ILS has done traditionally,” Lohmann said.

“Run-off is becoming a very interesting space, with much bigger deals being done.
“Equally, we are seeing a lot of capital pulling out of the Lloyd’s market. Could there be an opportunity there for ILS capital? Apart from Nephila, no-one has done that.

“We need to see what Lloyd’s CEO John Neal plans, but it is certainly something we are looking at,” he concluded.