Credit Suisse and ILSIM raise $576m for P&C run-off ILS fund

by Artemis on November 12, 2014

The Credit Suisse Asset Management (CSAM) insurance-linked strategies team and sub-advisor ILS Investment Management (ILSIM) have successfully raised $576m and closed the first ILS fund focused on property & casualty run-off portfolios.

The strategy has been in the works for more than a year, aiming to find a structure and investment strategy that would enable CSAM and ILSIM to offer institutional investors a way to access run-off or legacy property and casualty insurance business. The key was finding a structure which investors would be happy being locked into for a longer period, given the longer-tailed nature of casualty and run-off risks.

Today the firms announced the successful close of the ILS Property & Casualty Fund on 30th September with $576m of capital committed by a diversified mix of institutional investors. The investor mix includes public and corporate pension funds, endowments, insurers, fund of funds, asset managers, foundations and family offices, which clearly shows that the strategy has been well-received by a broad cross-section of the investor market.

CSAM said that the ILS P&C Fund complements the broad array of insurance-linked investment strategies it now offers, within its growing business. Credit Suisse AG now manages over $6.5 billion of insurance-linked assets, including the assets in this fund which are directly managed by the CSAM ILS team, which currently sees them as the second largest asset manager in the ILS sector, according to our listing of 40 ILS managers.

While ILS strategies offer investors an attractive way to gain returns which have a very low-correlation with broader financial markets, the P&C Fund offers something a little different, or unique, as strategies featuring longer-tailed property and casualty are much harder to find.

In fact this could be a unique strategy in a fund format, so the fact that the fund raised over half a billion clearly shows that investors had a strong appetite to access something different, outside of the more typical peak catastrophe risks or specialty that is more common in the ILS space.

The P&C Fund offers investors access to the returns of discontinued books of property and casualty business, lines that are in run-off and that have outstanding claims liabilities. The size of the opportunity could eventually be very large as there are many such books of business in run-off, however the quality levels associated with them will differ wildly making the expertise levels of those selecting and managing it vital.

Brad Huntington and John Williams, the Principals of ILS Investment Management who act as sub-advisor to CSAM for the P&C Fund, have between them over 50 years of experience in insurance with much of that dealing with managing P&C run-off portfolios, both in fund and corporate formats. Huntington and Williams are the Principals of Armour Group Holdings Limited, a firm that provides insurance business outsourcing, run-off, investment structuring and other services, which owns ILSIM.

It’s a fascinating strategy that has clearly been welcomed by investors, leading to the capital raise of $576m. ILS Investment Management and CSAM have taken the lead in structuring a fund that enables investors to‎ take a broad spectrum of insurance risk, risks which have perhaps not been as readily accessible to ILS investors ever before.

The launch of the P&C Fund brings another strategy to the market which will allow ILS investors to access the returns of a different type of re/insurance business. At the moment this is a unique proposition, which may in future find others seek to copy. However, having the expertise in managing run-off business is key for a strategy like this fund, as it is an entirely different proposition to managing a portfolio of one year reinsurance contracts, as is more typical in ILS.

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