Alecta, Sweden’s biggest pension provider, is investing $250m (€221m) in the 1863 fund platform of Swiss Re Insurance-Linked Investment Management (SRILIM), giving it exposure to natural catastrophe risk.
Tony Persson, head of fixed income and strategy at Alecta, said: “We are convinced that insurance-linked securities can generate high-quality and uncorrelated returns and are pleased to partner with Swiss Re to benefit from its extensive expertise in this domain.”
He said Alecta was looking forward to a “long-lasting collaboration” with Swiss Re.
Meanwhile Martin Bisping, chief executive officer of SRILIM, said his firm was very excited to have Alecta as a strategic partner, and that the agreement marked a significant milestone, particularly in terms of asset raising, in “the still young history of our 1863 fund platform”.
Since its launch a year ago, he said the platform had achieved strong investment performance.
Persson told IPE that all of the new allocation was exposed to natural catastrophe risks via the 1863 insurance-linked securities (ILS) fund, which was itself exposed to a pool of “Nat Cat” reinsurance contracts underwritten by Swiss Re.
“An asset class that is by definition uncorrelated with financial markets provides us with a highly-diversifying asset, still an attractive return over time,” he said.
As a long-term investor, Persson said the SEK1.1trn Swedish occupational pension firm was well-suited to manage the inherently volatile returns from property catastrophe reinsurance.
“But the asset class needs to be evaluated over a long time as you can lose a fair bit of your investment in just a day,” he said.
If this happened, one would need to rebalance the position and gradually rebuild returns by keep writing business at likely higher premium levels, he added.
“We also see that the reinsurance industry is a critical part of the financial ecosystem needed to price, mitigate and absorb increasing climate related catastrophe risks,” Persson said.