PIMCO is to enter the insurance-linked securities (ILS) market, launching a business in partnership with its parent, Allianz.
The fixed-income specialist said the insurance-linked market was a “strategically important asset class” for its broader alternatives platform. This had $34bn (€30bn) of assets under management at the end of September.
It would work with Allianz to source global catastrophe risk in the form of collateralised reinsurance and other structured investments, but maintain independent underwriting and portfolio construction procedures, it added.
Emmanuel Roman, PIMCO’s chief executive officer, said: “We are excited to enter the insurance-linked securities market at a time when volatility has become a mainstay of financial markets and clients want to diversify their investments.”
Amer Ahmed, CEO of Allianz Re, added: “With PIMCO we have a partner with access to an investor base that can provide the capital for which Allianz can supply insurance risks, both traditional catastrophe exposure risks and over time other risk classes.”
PIMCO has hired Rick Pagnani to lead the launch of the business. He has more than 30 years’ experience in the ILS market, according to Pimco, and was most recently CEO of Mt. Logan Re, where he launched the third-party ILS investment business of Everest Reinsurance.
Many Swiss pension funds are familiar with the concept of ILS, having considered or invested in the asset class. Some have recently been trying to diversify away from it while others, like the CHF12.8bn (€11.3bn) Pensionskasse for the city of Basel-Stadt, was due to make its first foray in the market last year.
Dutch and UK pension funds also allocate to the asset class. Last year the £3bn (€3.5bn) local authority scheme for North Yorkshire appointed an ILS manager to run an allocation of 3.3%-5% of total assets.