CATCo targets traditional reinsurance investments with new Aquilo Fund

Specialist reinsurance linked asset manager CATCo Investment Management has launched a new investment fund called Aquilo which will target traditional reinsurance, rather than the retrocession market which is more typical of the firm.

CATCo has announced the expansion of its product range to include the Aquilo Fund, which will be its first product targeting the traditional reinsurance sector instead of the retrocessional reinsurance market. CATCo has built a strong track record in the retro market so its entry into traditional reinsurance will no doubt make waves among incumbents in the sector.

The Aquilo Fund will offer investors exposure to reinsurance risk and will seek capital return over the short-term. The fund will underwrite traditional reinsurance risk on a collateralised basis, so providing coverage to primary insurers rather than to reinsurers, and will invest in fully collateralised contracts exposed to global reinsurance risk, insurance-linked securities (such as notes, swaps or other derivatives) as well as other financial instruments.

The Aquilo Fund will be managed by Tony Belisle, the CEO of CATCo Investment Management, as well as by CATCo’s two new Director’s of Underwriting, Charlie Vaughan and Rick Montgomerie, who will co-manage the Aquilo strategy.

Aquilo will focus will on providing catastrophic reinsurance protection to the underserved small to mid-sized global insurance community. This should help the fund to avoid some of the most competitive areas of the reinsurance market where the global reinsurance programs are currently over-signed at renewals.

CATCo’s Aquilo Fund has been approved by the Bermuda Monetary Authority and will launch with initial capital of $110m. CATCo said that it plans to grow the Aquilo Fund to $250m for 2015. Aquilo is CATCo’s sixth insurance linked investment fund launch since it began trading.

Tony Belisle, Chief Executive Officer of CATCo Investment Management Ltd., commented; “Within the CATCo Group of Companies there is a growing suite of products individually tailored to meet the different investment criteria for both CATCo’s existing and potential investors.”

CATCo has grown to manage over $2.5 billion of reinsurance linked assets in the three years since its formation and has generated a market share of around 20% in the retrocessional reinsurance market. This new strategy broadens the CATCo range of investment opportunities and puts it into more direct competition with other investment managers in the reinsurance space as well as with the traditional reinsurance market as it moves beyond retro.

It will be interesting to see how CATCo penetrates the traditional reinsurance sector as it brings its underwriting style and lower-cost capital to more traditional reinsurance contracts.

Belisle continued; “CATCo has a reputation for developing innovative solutions for its clients and we look forward to bringing our increasingly diversified investment strategies to the traditional reinsurance sector.”