Securis hits $3.05B ILS AuM, set to close on first Lloyd’s fund

by Artemis on November 24, 2014

London-headquartered insurance-linked securities and reinsurance-linked investments manager Securis Investment Partners has hit a new milestone in terms of the firm’s growth, reaching $3.05 billion of ILS and reinsurance assets under management.

Securis has been experiencing strong growth in its ILS and reinsurance assets under management in recent years, having added almost $1 billion per year over the last two years. The firm’s success is a reflection of its long-standing in the market, its increasingly strong team that it has been building as well as its offering, which has elements to it that help the ILS investment manager to stand out.

Artemis spoke with CEO of Securis Rob Procter about the impressive growth his firm has experienced. Procter explained; “We’re very pleased with a number of recent initiatives that will help further develop and differentiate Securis.”

In particular the Securis 1 Fund, which covers a range of insurance risks focusing on property catastrophe and life insurance, has been a real success driver for the firm. Securis announced this year that it planned to close the fund at $1.6 billion, to protect the risk-adjusted return and as it considered that an optimal size for the strategy had been almost reached.

With the Securis 1 Fund being diverse it provides a greater level of protection to investors from large catastrophes, compared to some other strategies in the market. The fund has been in demand, with the impending close having the effect of attracting more capital as investors sought to access the fund, which has returned an annualised 10%+ since its inception in 2005.

Securis has been growing its team in the last year and building out its recently launched operations in Bermuda, as it seeks to lay the foundations for continued growth in the ILS and reinsurance-linked investments space. The continued growth in its assets under management demonstrates that the firm continues to attract new investor capital and is growing its presence as a collateralised market for cedents as well.

With a platform now featuring facilities for risk transformation and collateralisation in both Guernsey and Bermuda, Securis has built out its options and reach within the global reinsurance market in the last year. The Bermuda expansion has also provided valuable origination access in a key global reinsurance market and the addition of several Bermuda Special Purpose Insurers (SPI) is seen as a complement to the use of Guernsey Protected Cell Companies, providing additional choice to cedents.

Securis has been building out its origination capabilities, largely through the addition of new hires that bring with them significant experience and relationships in the reinsurance space. The firm has grown its team to 40 in 2014, from about 30 a year earlier and 20 the year before that. Procter told us that this growth rate would likely slow down a little, in terms of headcount expansion, over the coming year.

Recent hires have added knowledge, experience as well as origination and access to new markets and business. In particular Securis has added expertise and experience in the Lloyd’s of London market, as well as hiring to fill positions in Bermuda which increase its origination options in that key reinsurance market as well.

On the subject of Lloyd’s, Securis is very near to closing its first Lloyd’s fund. This is a corporate member vehicle, which will be supplying capital to Lloyd’s syndicates, so effectively providing them with risk capital to put to work within their own businesses.

Procter explained that this new strategy is seen as a key way to continue to maintain Securis’ diversification; “None of this is really targeting property cat, it is more spread across typical Lloyd’s specialty business, so helping Securis to reduce its reliance on property catastrophe risks.”

The provision of risk capital as a financing tool, to enable growth and build relationships with cedents in new markets, is increasingly a new tool in the ILS managers box. Securis is likely to leverage the relationships it builds through its first fund at Lloyd’s as a way to also gain access to increasing volumes of reinsurance business from the Lloyd’s market too.

“It is clear that there is a much bigger place for the ILS world in the Lloyd’s market. For the right players, with the right size and longevity in the ILS business, Lloyd’s is frankly pretty welcoming. We expect to do a growing amount of business in Lloyd’s and related markets going forwards,” Procter explained.

Securis is still incrementally raising capital into other vehicles and funds, so expects to see further growth in terms of assets over the coming months. The ILS manager is focused on completing its Lloyd’s fund launch, which is expected soon, as well as working towards the January renewals.

In terms of market conditions, Procter said that while pricing pressure is felt by Securis, it is perhaps not as evident as some might suggest; “Obviously there is downward pressure on rates, but I feel it’s a lot more sensible than many advertise. We’re increasingly seeing a discerning approach to protection from many buyers. Some are clearly being opportunistic, but we’re not selecting or seeking to win that business. Where we have long relationships with clients there is still pressure, but it’s not that great or worrying to us.”

Interestingly, Procter said that Securis has looked at about four times as many transactions in 2014 than it saw in 2013. This is evidence of the firms growing focus on origination and sourcing of quality risks and gives Securis much more choice for deploying its capacity, allowing the firm to focus on being selective and ensuring that the risks it does capitalise meet the various Securis ILS vehicles’ investment mandates.

As ILS investment managers like Securis increasingly add talent and experience, increase their origination and sourcing reach, grow their capital under management and add new strategies to their offering, there is a strong likelihood that they will continue to take business away from traditional markets.

With cedents increasingly becoming familiar and building relationships with ILS managers that have been in the market for some time, these firms are building the very same relationships that the traditional market has been so keen to shout about. Expect further growth and innovation from the ILS space as we move forwards, with firms like Securis becoming established partners for reinsurance and risk capital cedents.

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