Twelve Capital expands strategy into insurance private debt

Specialist Zurich-based insurance-linked securities and reinsurance-linked investment manager Twelve Capital has expanded its investment strategy in recent days with the launch of an insurance private debt strategy to provide small and medium insurers with a new source of regulatory capital.

Not strictly on topic for Artemis, this is interesting as it shows a growing interest in finding new ways to access insurance market returns but in this case by assisting insurers with financing rather than risk transfer. More and more of the investors we speak with on a regular basis are looking for new ways to invest in the insurance and reinsurance market, away from traditional equity, and this strategy provides exactly that.

The strategy aims to help small and medium insurers access capital required for regulatory purposes and generate an attractive return for Twelve Capital’s investors.

Twelve Capital explained that as banks have been actively cutting back on lending, due to stricter capital requirements and their own efforts to keep cash on balance sheet, small and medium insurers have been finding accessing finance for solvency purposes difficult. Twelve Capital wants to step in and provide a source of funding, almost like a venture capital type approach, backed by its third-party investors.

Twelve Capital has been running an insurance bond strategy for three years, investing in European insurance firm hybrid debt, and has taken its assets under management to over $1 billion. Twelve Capital also provides investors with access to insurance-linked securities and collateralized reinsurance returns through its ILS strategy.

This new strategy in private debt for insurers will aim to provide small and medium insurers with solvency-relevant capital as bi-lateral loans of private placement bonds. The strategy benefits from Twelve Capital’s experience in collateralized reinsurance and insurance fixed income as to effectively issue private debt it will need to leverage its expertise in those areas when analysing and assessing opportunities.

Dr. Urs Ramseier, Chairman of the Board of Directors at Twelve Capital, commented; “We are thrilled to add this new strategy to our range of solutions for insurance and reinsurance companies. It complements our existing offering of collateralized reinsurance and traded bonds, and enables us to offer solvency-relevant capital to insurance companies in almost every possible format.”

Once this strategy is up and running Twelve Capital will be in an interesting position where they could offer investors a blended insurance and reinsurance-linked investment strategy, combining the elements of insurance-linked securities, collateralized reinsurance, hybrid insurance bonds and insurance private debt. That might be extremely attractive for certain investors with specific mandates and return targets.