AlphaCat lifts ILS assets to high of $3.4bn on new capital raise

Insurance and reinsurance linked assets under management at AlphaCat Managers Ltd., the insurance-linked securities (ILS) and arm of specialist re/insurer Validus Holdings, have recovered from the heavy losses of 2017 thanks to a fresh capital raise that has taken them to $3.4 billion at January 1st 2018.

Following the impacts of the three major hurricanes and wildfires in 2017 ILS fund investment managers, like the AlphaCat unit, were hit by the heaviest losses in the history of the sector.

AlphaCat itself saw its reported net assets shrink as a result of the impact of catastrophe losses, but that dip in assets has been short-lived as AlphaCat raised new capital from third-party investors in time for the January reinsurance renewals.

AlphaCat had grown its total ILS and reinsurance linked assets under management to $3.1 billion at July 1st 2017, a new high for the manager and with $2.9 billion of that figure sources from third-party investors.

But the ILS fund manager was hit hard by the major catastrophe events, with $574 million of incurred losses reported for the third-quarter of 2017. As a result, the managers ILS assets under management dropped by 7%, to $2.86 billion at October 1st.

But the AlphaCat team has been busy raising fresh capital from investors for its ILS fund strategies, reporting third-party capital inflows of $714.2 million by January 1st.

That large amount of new capital raised helped to take AlphaCat’s total assets under management to $3.4 billion as of January 1st 2018, with third-party assets contributing $3.2 billion of the total.

Lixin Zeng, Global Head of Asset Management and Chief Executive Officer of AlphaCat, explained, “We appreciate the ongoing support of AlphaCat’s investors despite a challenging year for the reinsurance markets in 2017. Their long-term commitment to investing in reinsurance through the ILS sector has fueled the growth of AlphaCat and allowed us to develop a strategy which expands the breadth of solutions offered to the Validus Group’s reinsurance customers.”

So AlphaCat provides another example of an ILS fund manager taking heavy losses from the major catastrophes, paying claims and resolving issues around trapped collateral or reserves, while raising new capital from investors to come out of the January reinsurance renewals even larger than they were prior to the first of the major hurricanes.

ILS fund managers have in the main successfully navigated the largest catastrophe claims in the sectors history and come out the other side larger and more influential in the reinsurance market.

AlphaCat’s increased AuM will serve it and its investors well, as it benefits from the higher reinsurance and retrocession rates that were seen at 1/1. It will be interesting to see whether the growth we’ve seen over the renewal can continue for ILS managers as we approach the mid-year renewals.

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