Credit Suisse-Backed Insurers to Wind Down as Investors Exit

(Bloomberg) -- Two reinsurance vehicles backed by Credit Suisse Group AG investment funds are winding down after key investors decided to pull out.

Humboldt Re and Kelvin Re, which use money from institutional investors to reinsure natural catastrophes and other risks, will stop underwriting new business next year, Credit Suisse said in a statement Wednesday. Kelvin Re is funded with money from the Abu Dhabi Investment Council, according to reports. The bank declined to comment on the identities of the investors.

“Due to independent strategic decisions by the two ultimate institutional investors this year, these entities will discontinue to participate in reinsurance activities for 2021,” Credit Suisse said in an emailed statement. “These two investment funds are expected to gradually reduce their asset size over the coming years.”

The withdrawals are another blow to Credit Suisse’s asset management unit, which is one of the biggest providers of investments linked to insurance. The unit, traditionally a source of stable income and low risk, has been closing down funds and laying off employees at its alternatives business, while overhauling investment guidelines for others. The bank is in the middle of a strategic review of asset management, though the closures of Humboldt Re and Kelvin Re are being made separately.

Read more on Credit Suisse’s asset management woe

The two reinsurers have equity capital of $1.4 billion and total assets of around $2 billion. They are independent of Credit Suisse with separate boards of directors, although their investments are managed by the Swiss bank.

Credit Suisse’s insurance-linked securities investment team has around 35 people managing about $6 billion in assets, according to its website. Aside from the withdrawals, the team and its main funds are not affected, the bank said.

Insurance-linked securities offer investors above-average returns during years with few disasters but can incur steep losses when earthquakes or typhoons multiply and damage property. Recently, the products have been tested by successive years of high disaster claims.

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