Hannover Re to back Leine Investment insurance-linked securities (ILS) fund

by Artemis on October 19, 2012

There’s a new insurance-linked securities (ILS) fund emerging on the scene thanks to a seed investment from German reinsurer Hannover Re. Hannover Re has had an internal ILS fund, which they have been successfully running since 2008, targeting a diversified portfolio of low-risk catastrophe bonds for their own benefits. Now they are turning what was a private ILS fund into a public one under the banner of newly established Luxembourg fund manager Leine Investment General Partner S.à r.l.

Looking at the registration information for Leine Investments, which you can find online, Hannover Re are currently the sole shareholder of Leine Investment General Partner S.à r.l. As an investment manager Leine Investment will manage the assets held within a specialised Luxembourg investment fund named Leine Investment SICAV-SIF.

We spoke with Henning Ludolphs, a Director at Hannover Re who head’s up their ILS division, who told us that Hannover Re would be an anchor investor in the fund, gradually transferring up to $150m of capital invested in their internal ILS fund into the new public Leine Investment fund structure.

The Leine Investment ILS fund was recently formed, on the 18th September according to the company documents and will be open to third-party investor capital from 2013 onwards. Henning Ludolphs told us that the new Leine Investment ILS fund would have a very similar investment strategy to Hannover Re’s internal fund, which has been successfully managed since 2008. This gives Leine Investment a track record which can be crucial for attracting new capital in the current market climate.

The fund will invest predominantly in catastrophe bonds, but ILWs and other financial instruments may be invested in on a complimentary basis, according to Ludolphs. The fund will not be investing in collateralised reinsurance.

We asked Henning Ludolphs what motivations drove Hannover Re to launch this ILS fund. He told us; “During the past few years Hannover Re had been approached by third parties seeking to invest in ILS. Given this, Hannover Re took up this idea and has initiated the set-up of a new investment company Leine Investment open to third parties.”

Hannover Re’s involvement in a public facing ILS fund comes at an interesting time. Recently another reinsurer, Munich Re, explained their plans to operate an ILS fund to us and a number of other reinsurers have some involvement in an ILS fund. With Hannover Re being anchor investor in the Leine Investments ILS fund and with Leine Investment adopting a similar investment strategy to Hannover Re’s prior ILS fund, it should give investors confidence that the strategy is valid and that Hannover Re’s motivations are aligned with their own as they are an anchor investor.

“Hannover Re is an active participant in the ILS market. In 1994 Hannover Re issued the first catastrophe bond ever and since then has issued a variety of insurance-linked bonds covering life and non-life risks, catastrophe and non-catastrophe risks. Furthermore, Hannover Re started a new Insurance-Linked Securities division in 2008 that is active in the facilitation of the transfer of and transformation of clients’ risks to capital markets as well as in investing into catastrophe bonds. Going forward Hannover Re will participate as investor in the ILS market by being anchor investor in Leine Investment”, commented Henning Ludolphs.

Three people are listed as managers of Leine Investments in the company registration documents; Chairman Bruno Vanderschelden of MDO Services, a firm who offer management and director services, Dr. Detlef Mertens of M.M.Warburg, an independently owned private bank, and Tom Beckmerhagen of Hannover Re who has been managing the Hannover Re internal fund.

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