Securis grows its ILS assets under management to $6.2bn

by Artemis on January 9, 2018

Securis Investment Partners, the London-headquartered insurance-linked securities (ILS) and reinsurance-linked investments manager, has significantly increased its ILS assets under management to $6.2 billion as of the start of the year, a 35% uplift in just six months.

Securis Investment Partners had roughly $4.6 billion of ILS and reinsurance linked assets as of July 1st 2017, or $4 billion at the start of last year.

Having successfully navigated the catastrophe losses of the second-half of 2017 and raised fresh capital for the renewals, the manager now lifts itself into the top-five largest ILS fund managers, according to the Artemis ILS Investment Managers Directory.

At $4.6 billion of assets Securis was one of the ten largest ILS and reinsurance linked investment fund managers in our Directory, but now with the fresh capital raised adding to their total the firm jumps up to 4th place with its $6.2 billion pool of capacity.

Artemis spoke with Securis’ Chief Executive Officer (CEO) Rob Procter, Global Head of Origination Neil Strong and Head of Life Luca Tres, to discuss the increased size of the managers’ assets, as well as market conditions at the reinsurance renewal on January 1st.

Procter said that as well as deploying more capital, Securis has benefited from rate increases across its portfolio at the key January renewal season.

“After an initial slow start, we were pleased to be able to renew our larger investments with core counterparties at attractive rate increases,” Procter explained.

He continued, “There then followed, a flurry of activity over the last week of the year. In the end, plentiful capacity was available in the market as it became clear that there would be no late pricing surge and cedants needed to put coverage in place and reinsurers had premium targets to hit. The late flurry was largely from rated carriers who capitulated on their previous stance.”

Strong explained in more detail what the rate increases mean for a portfolio managed ILS strategy, such as those operated by Securis.

“As a whole, the renewal for Securis was a successful campaign in terms of risk adjusted rate increases and in particular, the number of opportunities we were able to originate and indeed the proportion declined. It is worth noting, that a given rate change can translate into a much better mean return, $ margin & Sharpe ratio – for example, a 10% price increase can double the mean return and Sharpe ratio,” Strong said.

“The latter stages of the renewal were modestly disappointing as achieved rate increases generally fell short of the levels we had hoped for,” Strong commented. “However, due to seeing so many investment transactions and our quick response times, we were able to be nimble and select only the very best of investment opportunities, in many cases with smaller investment size than the larger more attractive earlier investments. This ability to source new investment opportunities is testament to the strength and ability of our Origination efforts.”

With rate rises across reinsurance largely experienced as lower than had been hoped for at 1/1, the team at Securis still hope that the increases seen will persist through into the next major renewal seasons.

“The 1/1 renewal does represent a pricing inflection point, which we believe and hope will follow through over the course of the year into the April, June and July renewals,” Procter said.

With levels of capital across the reinsurance and ILS market remaining high at January 1st, despite the major losses that struck the industry in the latter half of 2017, competition was high for signings.

In a competitive market, it is vital to maintain a focus on discipline no matter how much capacity is available to deploy, and Securis believes that by doing so they can provide a positive differentiator to their investors.

Strong explained, “We maintained our disciplined stance in terms & conditions, continuing to exclude cyber and where possible terrorism risks from basic property‐cat programmes. We also take a very strong position as regards commutation clauses and indeed other provisions that are not beneficial to our investors. These differentiating conditions, in addition to a number of investments with improved firm order terms, again ensured that we have a large number of investments that are at better terms and/or conditions.”

Securis also operates life insurance-linked investment funds, as well as non-life and catastrophe bond strategies, with life making up a growing percentage of the managers assets under management.

“Life transactions were up three times at Securis Investments, with the main motivator being Solvency II capital constraints,” commented Head of Life at Securis, Luca Tres. “We re-launched and revamped the Securis Life Fund, securing new subscriptions and investment support. Life is an important and diversifying asset class within the Securis overall portfolio.”

Looking ahead Securis is confident on opportunities for the year and beyond, with its enlarged size helping to make the ILS manager an increasingly influential market for reinsurance and retrocessional ceding companies.

CEO Procter told Artemis, “This has, by far, been our busiest January renewal – Securis enters 2018 in very good shape – with $6.2 billion of firm-wide AUM, up from $4 billion at the start of 2017. We have work to do in terms of recouping lost returns for some of our clients, but I feel we are in the best possible shape to do so. I think it is very fair to say investors have come to view Securis as one of the leading and “must have” investments in the ILS space.”

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