Insurance industry steps into the Canada Pension Plan

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The Investment Board for that country’s largest pension fund manager has now made an important purchase.

The recent news has now been announced, stating that the Canada Pension Plan Investment Board has agreed to make a $1.8 billion acquisition of Wilton Re Holdings Ltd. in order to take the largest pension fund manager in the nation into the life insurance industry.

This reinsurer is being purchased by investors and represents the first foray of Canada Pension into this sector.

Canada pension plan insurance industryAmong the investors taking part in this acquisition in the insurance industry are Vestar Capital Partners Inc., Stone Point Capital, and Kelso & Co. It represents the first time that Canada Pension has made a direct investment into this sector. However, it saw Wilton Re as “an ideal platform” for providing the Canada Pension Plan Investment Board (CPPIB) with the capability to “deploy significant follow-on capital at scale in the U.S. life insurance sector.” This, according to Andre Bourbonnais, the CPPIB senior vice president of private investments.

Investments in the reinsurance and insurance industry are appealing for pension funds for several reasons.

Primary among those reasons is that this sector looks to grow cash over the long term in order to match its liabilities. Over the last few years, Wilton Re, a company based in Bermuda, has been able to hone in on opportunities by absorbing business from primary carriers that are looking to be able to mitigate risks or simplify their operations.

Earlier in 2014, Wilton Re entered into a number of deals for assuming liabilities, such as from CAN Financial Corp (the Loews Corp controlled insurer), and from CNO Financial Group Inc. The reinsurer is run by Chris Stroup, a former executive from Swiss Re Ltd. In 2004, the company received the backing it required from investors that include Vestar, and insurance broker Marsh & McLennan Cos.

From 2005 and through the years that followed, Wilton Re has made at least $1.7 billion in investments in the insurance industry in the form of acquisitions and risk transfer deals, according to the official acquisition statement that was recently released to announce the deal.

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