Swiss Re gains critical mass in ILS; on track for 9-digit fee income

Swiss Re is making a fully-fledged business segment out of its alternative capital and capital markets operations, getting triple-digit multi-year growth in AuM for select ILS asset groups and putting itself on track for nine-digit fee revenues.

Swiss Re claims a 215% increase 2018-2021 in fee income on alternative capital operations to points visibly above $80 million as the unit takes ceding and profit commissions and AuM fees on funds. A presentation charts progress to the $100 million mark.

“We think this can continue to grow as we explore the capabilities around this team,” Dacey said. A “large share” of the annual fee and commission revenue is already considered “recurring and well-diversified” business, management claimed in an accompanying presentation.

The confidence comes both as Swiss Re has hit the leader boards as structurer and arranger of third-party securities (#2 cat bond arranger 2000-2021), but also as it has grown its own alternative capital sums. Swiss Re lists a 267% rise in sidecar/fund platform valuations 2018-2021 to visibly above the $2 billion mark as well as a 146% rise in its own standalone shortfall relief to well in excess of $3 billion.

Officials remain confident that growth will return long-term to the segment after a hiccup in growth in 2021.

Headline losses both soured sentiment and trapped some elements of the capital pool to trigger the hiccup in growth in 2021, chief underwriting officer Thierry Léger admitted.

“I think that flattish growth on alternative capital ion 2021might be a bit of an indicator of that generally more cautious outlook for alt-cap,” Léger said, citing both a trapped capital pinch to capacity and a result-driven hit to confidence. “But do not believe we should expect a turnaround in appetite … it will continue to grow over time.”

Future market growth could prove more stable as a well-prepared and highly sophisticated investor pool emerges from the masses that initially charged the gates, Dacey hinted.

“Some market participants, especially those without a team having done a lot of research a priori, have been unpleasantly surprised at the ways you can lose money in insurance,” Swiss Re CFO John Dacey said to explain some signs of cooled investor appetite.

“I think the more sophisticated investor here believes this is a good place to find uncorrelated returns to financial markets.”

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