Swiss-based life insurer Allianz Suisse Life, part of Allianz Suisse Group, has concluded a reinsurance agreement with Bermudian reinsurance platform Resolution Re, designed to hedge its interest rate risk.
Resolution Re, which is owned by life insurer Resolution Life, has committed to cover the market and insurance risks of a legacy portfolio of life insurance products, which are in run-off and amount to CHF4bn in total liabilities.
The portfolio equates to 80% of the traditional life liabilities of Allianz Suisse and, according to Resolution Re CEO Steve Hales, is the largest Europe-to-Bermuda deal of its type.
As the low interest rate environment persists, life insurers are coming under growing pressure to meet the returns on products sold before the 2008 financial crisis with its ensuing loose monetary policy.
Remo Cavegn, chief risk officer at Allianz Suisse, said: “This transaction with Resolution Re benefits Allianz Suisse, the Allianz Group and the policyholders we serve by allowing us to de-risk the balance sheet while ensuring we continue to provide our customers with safe, long-term financial stability for the duration of their policies.”
Resolution Re was licensed in 2018 and holds an insurance financial strength rating of A3 from Moody’s.
Hales said: “We are delighted to have signed this reinsurance agreement with Allianz Suisse, the largest Europe-to-Bermuda life legacy portfolio reinsurance transaction to date and a great example of our holistic approach to managing biometric and asset risks.”
Moreover, the transaction is purely a risk transfer arrangement. Customers will continue to deal with Allianz Suisse Life and remain insured with the company.
Monika Behr, head of life business at Allianz Suisse, commented: “The reinsurance helps us significantly in our goal to remain a strong and reliable partner for our customers in the life business over the long term.”
Investment bank Jefferies Financial Group echoed the positive sentiments of the new business partners: “In our view, Allianz’s use of reinsurance rather than an outright disposal adds value for shareholders and is fair for customers.”