‘Traditional with a twist’: Structured re now core to balance sheet strategy, says Swiss Re

Structured reinsurance is increasingly used to bridge the gap between cedant needs and reinsurer appetite. Swiss Re’s Kaspar Müller tells Monte Carlo Today.

Structured reinsurance has moved from the niche to necessary, says Müller, chief underwriting officer for property & casualty structured solutions at Swiss Re. In a market juggling dividend capacity, ROE and earnings volatility, “traditional with a twist” structures are now a mainstream way for cedants to steady results and free capital without dulling risk signals.

Key points:
Structured reinsurance now essential
M&A boosted by clean structures
Affordability and resilience must align

“It’s clearly become mainstream,” Müller said. “We’ve been doing this for a long time, and we now have quite a large portfolio of transactions. Click here to watch the full video interview.

“Markets get more sophisticated over time, but the level of uncertainty is also increasing. With structured solutions, we can often increase the overlap between what a cedent is looking for and the appetite of a reinsurer. That’s why it has become much more commonplace and such an important tool.”

He added: “Certain questions around risk appetite and terms and conditions are not always resolved, and structured transactions can provide answers where traditional covers might fall short.”

The conversations around structured deals have shifted decisively to the C-suite. Müller explained that it is “really a CFO/CRO conversation” tied to dividend capacity, earnings per share, return on equity and balance sheet strategy. For catastrophe-heavy programmes, it can be “essentially earnings volatility protection” that reinsurers help drive down. In other words, structured solutions aren’t simply capital buffers; they are instruments to manage overall corporate performance.

One of the fastest areas of evolution is the combination of legacy and prospective solutions. Müller explained it was no longer just about legal finality. “It’s about managing that legacy book, potentially freeing up capital in that book, while at the same time protecting future earnings. We see more and more of those structures coming together in a single deal for a cedent.” He emphasised that often, more than one solution was offered within a single transaction, offering cedents a more holistic approach.

“Structured transactions can provide answers where traditional covers might fall short.”

Innovation, however, does not always mean creating something entirely new. “What we would call it is ‘traditional with a twist’,” Müller said. That might mean a multi-line quota share with a sliding commission scale “that dynamically aligned interests over time”. Or in cat programmes, it could be “funded sub-layers” which help clients manage their retention over time by balancing the risk component as well. 

These are familiar structures, enhanced with elements that make them more effective and broaden reinsurer appetite. “They can increase the overlap between client demand and reinsurance appetite,” he emphasised.

Structured reinsurance is also becoming a standard feature in M&A. “In my mind, it’s standard practice today,” Müller argued. “Reinsurance can often be used as a balance sheet tool. 

“If it is protecting future earnings, or offloading a part of the book that the buyer may not want, it can make whatever is being bought cleaner and more closely tailored to what the buyer is actually looking for.”

A pressing issue in today’s market is how cedents handle higher nat cat retentions. “It’s about managing those higher retentions and managing the volatility that comes with them,” Müller highlighted. While companies may accept higher retentions in principle, they “are not willing to take on the full risk”, and structured solutions can introduce protection over time.

This leads directly to the balancing act between resilience and affordability. “From a reinsurance perspective, we want resilience, and from the cedent’s perspective, the goal is affordability. I would call it sustainability,” Müller stressed. True value, he argued, is when solutions are sustainable for both sides, ideally over the longer term in strategic relationships. “It’s good for the cedent, because there’s long-term certainty about what a structure can be and what it can do. And it’s good for the reinsurer, because there’s long-term resilience in our results.”

The takeaway is clear: structured reinsurance is no longer ad hoc. “It’s really an integrated tool for managing a cedent’s balance sheet,” Müller concluded. “It frees up capital, it can manage volatility, it can enable larger growth. 

“One of the key elements is that it’s done within a structure that passes a very high bar, both from a regulatory and an accounting perspective. We’ve done over 1,000 transactions over the last five years, so we know that bar and we manage it very actively.”

Kaspar Müller is the chief underwriting officer for property & casualty structured solutions at Swiss Re. 

For more news from Monte Carlo Today, click here.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.