Blue Capital listed ILS fund portfolio hits 112 positions at renewal

by Artemis on July 14, 2015

London and Bermuda listed reinsurance and insurance linked securities investment fund, the Blue Capital Global Reinsurance Fund, deployed its portfolio across 112 different reinsurance positions at the mid-year June renewal.

The ILS funds investment manager, Blue Capital Management Ltd., a subsidiary of Bermudian reinsurance firm Montpelier Re and soon to become a part of Endurance once the merger between the two is completed, detailed its portfolio in an updated prospectus filing.

Blue Capital had already reported that it had successfully navigated the June reinsurance renewals, where it can acquire much of its property catastrophe reinsurance focused positions, with prices down only 4% across its renewal portfolio.

Now the insurance-linked investment manager has detailed that the renewal saw the fund gain its most diverse portfolio yet, with the 112 positions reported at mid-year 2015 a significant increase on the number reported a year earlier.

The Funds net assets at the end of June 2015 sat at over $212.5m, of which $186.2m is invested in the Master Fund. 88% of the fund’s net assets, as at 31st May 2015, is now deployed across a diverse portfolio of reinsurance linked investments and preferred shares of Blue Water Re Ltd.

The investments, which together represent 112 different positions across 47 counterparties and clients, also include preferred shares of the reinsurer Blue Water Re, a number of industry loss warranty (ILW) derivative positions and one catastrophe bond holding.

The combined positions represent deployment of $182.4m of funds and generates $32.6m of net insurance premium written and fixed ILW derivative payments, Blue Capital reports.

Blue Capital reported that at the renewal it “experienced a competitive underwriting environment with strong competition from traditional and alternative markets. Overall, the June 2015 trades were executed with an average risk adjusted rate decrease of 4 per cent. compared to June 2014.”

Following the renewal the Blue Capital Global Reinsurance Fund maintains a $25.5m pool of undeployed capital for use in paying future expenses and dividends.

The portfolio for 2015/16 is diversified across first event per-occurrence covers, aggregate excess of loss and also subsequent event, across both collateralized reinsurance and ILW products. 68.5% of the portfolio is deployed into property catastrophe reinsurance, 30.4% into industry loss warranties and 1.1% to the single cat bond holding.

The majority of the fund’s exposure is to U.S. East, Gulf and Florida coast wind and hurricanes. Interestingly Florida earthquake is also a peril high up the exposure for the fund, as are UK and Ireland earthquakes. Other key perils include European windstorm risks, New Madrid quake, Japan quake, Australia wind and quake and other quake regions of Europe.

The greatest first event exposure for the fund is to mid-Atlantic coast wind or hurricane events, which have a 29.2% first event exposure, below the fund’s stated maximum single event exposure of 35%.

Once again the Blue Capital Global Reinsurance Fund has expanded its portfolio diversification, with a greater number of contracts and counterparties underwritten at this years reinsurance renewal. That should position the fund well to make the best of the available returns, despite softer reinsurance pricing.

It will be interesting to see whether ILS fund’s like the ones from Blue Capital have an opportunity to allow further capital inflows as we move further through the year, with the January renewal perhaps looking set to see increased demand as has been witnessed in June this year.

Also read:

Blue Capital reports on reinsurance renewal, pricing down just 4%.

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