Allianz, Oaktree Set Up Reinsurance Syndicate on Lloyd’s Market

Allianz SE and Oaktree Capital Management agreed to set up a reinsurance syndicate on the Lloyd’s of London market, the latest example of a private capital firm pushing into the non-life sector.

The vehicle, named “Syndicate 1890,” will begin underwriting from Jan. 1, according to a statement on Monday. It will receive a share of Allianz’s reinsurance programs while Oaktree will fund the syndicate and manage its assets. The amount Oaktree is putting into the vehicle is in the hundreds of millions of US dollars, according to a person familiar with the agreement.

The Lloyd’s syndicate allows Allianz to avoid the collateral demands of a traditional special-purpose vehicle for risk transfers, making it easier for investors to provide capital. It also gives Allianz a more efficient way to access reinsurance without setting up bespoke contracts or negotiating individual security terms.

While life insurance has long been a hunting ground for alternative asset managers like Oaktree, they are now increasingly pushing into property-and-casualty reinsurance. Blackstone Inc. said in October it will back a new Lloyd’s syndicate that’s going to be run by Bermuda-based insurance underwriter The Fidelis Partnership.

“Syndicate 1890 is an important template for the convergence of alternative asset management and insurance,” Chris Boehringer, a managing director at Oaktree, said in the statement on Monday

Operating under Lloyd’s “streamlines market entry and governance” for alternative asset managers, Fitch Ratings wrote in a note last month. The firm also said that such partnerships add “structural complexity and credit risks that may surface late in stress scenarios.”

The expansion of alternative investment firms into Lloyd’s syndicates “provides the reinsurance market with new third-party capital but may heighten credit, liquidity, valuation and governance risks in the vehicles,” Fitch said in the report.

Besides Oaktree, Allianz had held talks with about 10 other private capital firms about setting up the syndicate, a person familiar with the negotiations said, declining to be identified discussing private information.

The agreement with Oaktree “will complement our existing strong relationships with traditional reinsurers,” Allianz Chief Group Reinsurance Officer Thorsten Fromhold said in the statement on Monday.

Photograph: Pedestrians pass the Lloyds of London office building on Wednesday, Nov. 15, 2023. Photo credit: Hollie Adams/Bloomberg