Capital Partners has been active for more than two years now. Does it meet your expectations?
After two years’ experience I can say, yes, our transactional success is perhaps the best proof that our strategy works. We have seen plenty of opportunities from a wide spread of traditional reinsurance clients, but also from industrial corporates, the public sector, the run-off segment and even InsurTech start-ups. What they have in common is that they are all looking for reinsurance or capital-market-driven solutions as a means to cope with their financial and risk management challenges.
Since 2015, Capital Partners has closed over 60 transactions in all parts of the world with a premium volume over €2.5bn.
Why is Capital Partners so successful?
I think one of the most important factors is that we are a one-stop shop for a wide range of solutions and therefore do not just sell specific products. We focus on what makes our clients successful, the strategies they are driving, and how we can support them on their way to success.
We provide prospective and retroactive solutions, capital market and financing products. Capital Partners serves clients, investors and brokers worldwide, ensuring our clients have access to a global expertise from origination to structuring plus an in-depth knowledge of investors’ needs. To match our clients’ expectations, coverage of all these topics at global level from a single source by experienced professionals is key.
Capital Partners can make the best use of Munich Re’s structure with a fully integrated operating model. We collaborate closely and jointly transact in global “deal teams” with our client management, underwriting and expert teams worldwide. This comprehensive teamwork ensures that specific market, client and risk know-how forms an integral part of our solution development and contributes to our clients’ performance beyond traditional reinsurance needs.
What about the retro and ILS market?
Yes, the fact that we also use Capital Partners’ expertise and capabilities for our own risk and capital management makes our approach and the solutions we offer to clients even more credible. Exploring the retro and ILS market has been a key element of our strategy for many years, of course, and in that sense our “one-stop” retro approach is entirely consistent. Capital Partners now addresses the increasing convergence in the traditional and alternative retro markets via an integrated retro buying strategy. Let me explain: Our various retro/capital market activities, i.e. traditional indemnity retro, sidecars and cat bonds, are fully aligned in an overarching Munich Re risk transfer strategy. The multitude of perspectives and unbiased views we have on the market as a retro buyer, an ILS investor, a structurer and enabler of capital market solutions for clients is appreciated by our clients when they take their own decisions.
As is well known, Capital Partners has an extensive track record in the ILS space and has brought many transactions to the market for clients and for our own book of business. Capital Partners also assumes the role of an active investor in the ILS market. By combining our structuring expertise and investor relationships with our own perspective as an investor, we are in a unique position to understand the different needs of various market players.
Can you give us some insights as to which challenges our clients are facing ?
There is a diverse set of client motivations, and demand naturally differs depending on the various client segments. We see some of the larger and global insurance companies looking for ways to efficiently manage their capital, e.g. releasing trapped capital at subsidiary level; whereas some regional insurance companies are seeking additional capital, e.g. to finance future growth. Industrial corporates and captives are more likely challenged by how to successfully manage volatility in light of earnings expectations and capital efficiency. The public sector is looking for capacity and liquidity after a loss event like a natural catastrophe, but also for new means of impact and resilience financing. Last but not least, the run-off market is asking for solutions to achieve capital relief to finance portfolio transfers and to provide finality in light of their clients’ strategic decisions.
"I think one of the most important factors is that we are a one-stop shop for a wide range of solutions and therefore do not just sell specific products. We focus on what makes our clients successful, the strategies they are driving, and how we can support them on their way to success."
What else makes Capital Partners special for our clients?
We are investing a fair amount of time in exploring new topics which will lead to future business opportunities – for example new client groups like the public sector, corporates or the start-up space, and new solutions, new distribution channels and new demand on the horizon. We go the extra mile for our clients and brokers and are prepared to look into opportunities where a solution might not be viable at first sight. This is also part of Munich Re’s strategy to expand the frontiers of insurability and drive our growth by breaking new ground. In the meantime, about 20% of the opportunities we currently work on are of that nature.
How bright is the future?
We see a vibrant pipeline of transactional opportunities on a global scale. Strong demand in Europe and North America is increasingly matched by the Latin American, Asian-Pacific, Middle East and African regions. So, besides our Munich and Zurich operation we further strengthened our Americas hub dealing with North and Latin America and we recently also extended our global footprint to the Asia-Pacific region, namely in Singapore and in Beijing.
Enlarging our key client base is very important and we do so regularly to get our arms around other challenges which can be solved with our tool case and skill set. In the context of digitalisation, big data and analytics, we liaise with traditional clients and InsurTech start-ups and provide solutions in this area as well, for example for new distribution channels.
Capital Partners is a growth story both close to our core business and beyond with an impressive track record during its first two years. I am pretty sure there is more to come.