Korea Post Savings launches search for ILS fund manager

Korea Post Savings, a South Korean government backed savings entity linked to the countries state-run postal service, has launched an RFP process to find an insurance-linked securities (ILS) manager to allocate funds to.

Korea Post Savings is one of the largest investment groups in South Korea, overseeing somewhere around US$90 billion of assets and is considered akin to a sovereign wealth fund. It manages savings for citizens of the country, with its Postal Insurance unit managing portfolios of equities, fixed income, hedge funds and other alternatives.

The investor has been diversifying its portfolio in recent years, shifting away from its traditional reliance on equities and bonds, moving into asset classes such as real estate, hedge funds and other alternatives.

Now Korea Post Savings has identified insurance-linked securities (ILS) and reinsurance linked investments as an attractive opportunity and has issued a request for proposal (RFP) asking ILS fund managers to respond with details of their credentials, track record and strategies that meet the investors requirements.

The RFP details two strategies that Korea Post is interested in, a diversified ILS strategy with an expected loss of 3% or below, and an opportunistic ILS strategy with an expected loss of above 3%.

The RFP process has some restrictions, with Korea Post looking for ILS fund managers with over $1 billion of ILS assets under management and the ILS fund strategies proposed must have over $200 million of insurance and reinsurance linked assets in them to be of interest.

A track record is also vital, with ILS managers required to have five years since establishment, while the proposed ILS funds must have been continuously managed for three years with no breaks.

Korea Post is open to a range of lock-up and redemption restrictions, but does not want life risks to make up more than 5% of the ILS funds proposed and that can only be mortality risk, so no longevity or embedded value type exposures.

In terms of instruments included in the ILS funds, it seems Korea Post is open to everything from catastrophe bonds, to private collateralised reinsurance and retrocession, industry loss warranties (ILW’s), sidecars and other types of ILS assets.

The organisation is not the first South Korean investor to look to the ILS asset class. As we explained recently, the Public Officials Benefit Association (POBA) of South Korea has allocated to three ILS fund managers and intends to increase its allocation to the sector.

Korea Post Savings is asking for RFP responses to be submitted by the 17th March 2017, with the process looking set to run until the end of April at which time a selection will be made. Details of the RFP are available at the Korea Post website.