Swiss Re has entered into a reinsurance arrangement with Zurich subsidiary Bansabadell Vida which will see the firm reinsure and take on the risks of a portfolio of individual life risks, in return for a reinsurance commission payment of EUR 683.7 million.
Bansabadell Vida is a Spanish life insurance joint venture of insurance giant Zurich and Banc Sabadell.
The company said that it has signed a reinsurance agreement with Swiss Re covering its portfolio of individual life risks with an amount of EUR 683.7 million paid as a reinsurance commission.
The transaction is designed to help Bansabadell Vida realise the majority of the embedded value of this portfolio of life risks, which helps the insurer to strengthen its capital position under Solvency II and provides it with cash to fund future growth.
Swiss Re assumes the risks on this life insurance portfolio under this arrangement, but Bansabadell Vida will continue to manage the policies on an administrative basis. Therefore the policy holders included in the transaction will see no change, with Bansabadell Vida remaining their insurance point of contact.
Bansabadell Vida highlighted that this is the first such transaction undertaken in Spain since Solvency II came into force.
Bansabadell Vida’s General Manager, Javier Valle, commented saying that the transaction presents, “A great opportunity to value our insurance portfolio, and strengthen the company to undertake the ambitious business growth plan we have for the next few years.”
He continued, “We have signed the agreement with Swiss Re, a world-renowned entity with proven experience in the life reinsurance business and with excellent levels of solvency and financial strength.”
Analysts at JP Morgan noted that this tailored transaction provides capital that is immediately fungible to Bansabadell Vida, where as the underlying embedded value of the life book was restricted.
The analysts said that for Swiss Re the transaction is positive, likely to generate margins and an embedded value uplift for the reinsurer. The cash payment is expected to be accounted for as a deferred acquisition cost asset. Swiss Re will receive a quota share of the premiums for the duration of this life insurance book.
Zurich and Banco Sabadell supported the completion of the reinsurance transaction.