Credit Suisse shuts US$2b insurance units after withdrawals

[ZURICH] Credit Suisse Group is winding down two reinsurance vehicles with assets of about US$2 billion after key investors moved their funds out.

Humboldt Re and Kelvin Re, which use money from institutional clients to reinsure natural catastrophes and other risks, will stop underwriting new business next year, the bank said in a statement on Wednesday. Closing the Guernsey-based vehicles is a blow to Credit Suisse's asset management unit, which is one of the biggest providers of investments linked to insurance.

"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.

"These two investment funds are expected to gradually reduce their asset size over the coming years."

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

The withdrawals add to problems at Credit Suisse's asset management unit, which is 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.

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

BLOOMBERG