Amlin aims to leverage third-party capital to enhance return potential

Specialist insurance and reinsurance underwriting group Amlin aims to capitalise on the interest that third-party capital from sources such as pension funds has been showing in the catastrophe reinsurance market as it seeks to enhance its return potential. In the insurance and reinsurance groups latest preliminary results report, Chief Executive of Amlin Charles Philipps said that the firm intends to explore how it can utilise its existing interests to leverage third-party capital.

Amlin clearly have a desire to expand the way third-party capital from institutional investment sources such as pension funds plays a role in its underwriting business. In mid-February Charles Philipps discussed the need for the London insurance market and Lloyd’s to embrace third-party and alternative forms of capital, citing the opportunity he saw for the markets to profit from leveraging outside capital.

Amlin already have an interest in the third-party capital management arena in the form of its stake in joint venture insurance-linked securities (ILS) investment fund manager Leadenhall Capital Partners. At the end of 2012 Leadenhall grew to over $850m of assets under management and has been experiencing further growth in recent months as it successfully attracts third-party capital to its funds and managed account ILS investment options recently passing the $1 billion AuM milestone.

In his statement, Philipps said that Amlin intends to explore how it can use the strength of its reinsurance franchise along with its interest in Leadenhall Capital to leverage pension fund capitals growing interest in catastrophe reinsurance and enhance the companies returns. Amlin are in a very strong position in this respect given its multi-domicile reinsurance operations and the established and successful track record which Leadenhall Capital has built for itself.

Should Amlin choose to begin underwriting using more third-party capital it already has a good platform in place to attract funding and manage capital through its interest in investment manager Leadenhall, and deploy capital through its underwriting businesses. This puts Amlin a step ahead of some other insurance and reinsurance groups which are only now establishing third-party asset managers to take advantage of the growth in reinsurance-linked investments and ILS.

Leadenhall Capital Partners has a track record running back to 2008 when it launched with Amlin already a partner. Their stake in Leadenhall increased to $111.9m across the ILS managers two funds in 2011. According to the recent results announcement Amlin now has $116.5m invested in Leadenhall’s two funds, an investment which offered a return of 6.0% in 2012.