Peak Re aims to bring more ILS capacity to Asia and beyond: CEO, Franz Josef Hahn

After increasing the size of its parallel reinsurance transaction in 2021, followed by the issuance of its first catastrophe bond earlier this year, Hong Kong-domiciled reinsurer Peak Re aims to further leverage the market for debt-related securities. insurance (ILS) to close the protection gap.

That’s according to the company’s CEO, Franz Josef Hahn, who spoke to Artemis around the annual reinsurance industry meeting in Monte Carlo, about the company’s alternative capital ambitions.

“Peak Re was founded to meet the needs of communities and the emerging middle class in Asia and beyond. The potential is promising. By 2030, two out of three members of the middle class will be Asian, according to a study by the Brookings Institute,” Hahn said.

“Supporting Asia’s growth while closing the protection gap will require significant capabilities beyond traditional capabilities.

“As a result, Peak Re has been tapping into the insurance-related securities market since 2018 through a parallel reinsurance transaction. Lion Rock Re Ltd. was the first parallel transaction sponsored by an Asia-based reinsurer,” he continued.

Lion Rock Re provides the company with access to efficient retrocession capability in the capital markets. Peak Re first launched the Bermuda-domiciled sidecar structure in late 2018 with a $75 million issue.

In 2020, the reinsurer renewed the sidecar with a $77 million Lion Rock Re II issue. The following year, Peak Re renewed the sidecar at a record $107 million, showing that its vehicle is clearly gaining growing investor support.

Whether the carrier will renew its successful sidecar structure for the fourth time remains to be seen, but Hahn stressed that going forward, it will continue to keep its options open for alternative capital to support its growth.

“Indeed, ILS capability has become an integral part of Peak Re’s retrocession strategy as it increases profitability and reduces risk and volatility,” Hahn said. “Over the long term, we aim to bring more capacity into the ILS market to help bridge the protection gap in emerging Asia and beyond.”

After issuing the first Asian reinsurance-sponsored sidecar deal, Peak Re sponsored its first catastrophe bond in 2022, a $150 million deal from Black Kite Re Limited. It was the first cat 144A bond issued by a Hong Kong specialty insurer and became the second cat bond structure to be located in Hong Kong.

Developing Peak Re’s first cat bond, Hahn told Artemis that Asia is still at an early stage of development in terms of ILS, including cat bonds.

“This issuance is significant in validating the strong investor interest in high quality reinsurance risks. This is an important step in familiarizing related parties with the structuring of such obligations.

“Understanding of the insurance securities asset class has only recently increased in Asia, along with each new transaction. Transaction costs will continue to fall with more issuance and help support a critical ecosystem of brokers, legal advisers, bookrunners, and more.

“While the development of new ILS solutions in our region is undoubtedly important, it is equally important to clearly explain and communicate the benefits and risks of these solutions to the growing investor base,” Hahn concluded. .

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Carol N. Valencia