The Ontario Teachers’ Pension Plan Board (Ontario Teachers’), the administrator of Canada’s largest single-profession pension plan, has officially become the first investor to support underwriting through the Lloyd’s-managed London Bridge Risk (LBR) Protected Cell Company (PCC).
The PCC was created as part of the Future at Lloyd’s strategy, with the intention of providing an access point for both UK and international investors, including insurance-linked securities (ILS) investors, to deploy funds in a tax transparent way into the Lloyd’s market. It also provides Lloyd’s members with a new vehicle to manage their capital requirements by attracting new classes of investors, such as pension funds.
Lloyd’s announced that the transaction with Ontario Teachers’, which has approximately $227.7 billion in net assets, will provide reinsurance cover to a Member supporting three syndicates in the Lloyd’s market: CFC Syndicate 1988, Beazley’s Syndicate 5623 and Beat’s Syndicate 1416. The coverage will start in 2021 and will be expanded in 2022, providing initial capital in excess of £100 million (approx. $168 million), which is anticipated to grow over time.
“I’m delighted to welcome major global pension investor Ontario Teachers’, who are well regarded in the ILS community, as the first to utilise LBR PCC to participate in underwriting at Lloyd’s,” said Lloyd’s CFO Burkhard Keese. “It is a great achievement to see the PCC used, on-shore in the UK, to deliver reinsurance coverage and I am confident that this will be the first of many ILS investments into Lloyd’s as investors, members and syndicates increasingly appreciate the potential of this transformer vehicle.”
Ontario Teachers’ holds a diverse global portfolio of assets, around 80% of which is managed in-house. The pension fund, which invests and administers the pensions of Ontario's 331,000 active and retired teachers, has earned an annual total-fund net return of 9.6% since the plan's founding in 1990.
“We invest in a range of global assets, including insurance-linked securities, and are always looking for efficient opportunities to maximise returns and increase value for our members,” said Nick Jansa, senior managing director, EMEA, at Ontario Teachers’. “LBR PCC provides an innovative and efficient way to simplify our investment structures as we continue to grow our global footprint.”
Leaders at the three Lloyd’s Syndicates that are currently accessing capital via the London Bridge Risk PCC have all expressed excitement over the “strategically important innovation”.
Adrian Cox, CEO of Beazley Group, said: “Beazley is pleased to see the successful launch of the first LBR PCC acting as a transformer for institutional capital to access one of our most innovative underwriting portfolios. As those portfolios continue to grow over the coming years, Beazley hopes to see further users of the new UK ILS infrastructure benefiting from low cost, efficient access to the group’s underwriting expertise.”
Meanwhile, Matt Taylor, active underwriter at CFC Syndicate 1988 said capital delivery mechanisms like LBR PCC are “crucial” for syndicates with high growth expectations because they “allow simplified investor access” and attract “sophisticated large-scale institutional investors”. Paul Rayner, partner at Beat Capital Partners, added: “Given our perpetual third-party capital outlook, LBR PCC is a strategically important innovation that allows us to efficiently connect with high quality alternative capital partners alongside our existing capacity supporters.”
