Prudential in $100m allocation to Securis post-event ILS fund strategy

by Artemis on February 6, 2018

The Prudential Portfolio Management Group (PPMG), an asset allocation unit of global financial services group Prudential plc, made a $100 million allocation to a post-event ILS fund strategy managed by Securis Investment Partners at the end of last year.

Following the impacts of major hurricanes and catastrophe losses in 2017, the insurance-linked securities (ILS) and collateralised reinsurance markets have been able to source some higher rates at January renewals in 2018. With that opportunity in mind a number of ILS fund managers launched special post-event fund strategies, which have proved attractive to major investors, especially those with experience allocating to the ILS space.

The Prudential Portfolio Management Group (PPMG) is one of those investors, having already allocated capital to the flagship fund of London-headquartered ILS and reinsurance-linked investments manager for a number of years.

PPMG first invested in ILS through Securis in 2007 and today still holds allocations to the Securis I Fund, a fund that has existed since 2005 and invests predominantly in collateralised reinsurance we understand. These allocations are held as a core ILS allocation in a number of multi-asset class fund strategies that PPMG operates.

But PPMG sought to expand its ILS allocation in the wake of the major industry losses that struck insurance and reinsurance in 2017, hence allocating $100 million to the Securis Event Fund.

This fund will only run for one year, we understand, providing a way for investors to benefit from higher reinsurance rates that were achievable at the January 2018 renewals.

PPMG said it sees the allocation as a tactical move, designed to access an enhanced return from the ILS market over the 12 months of 2018, with returns that are likely to be in double-digits.

The strategy is focused on the regions affected by losses, so largely United States weather and catastrophe linked reinsurance contracts, with U.S. wind likely the major piece of the portfolio, we understand, given the impacts many programs felt from the hurricanes.

PPMG said it was attracted to the potential returns that could be achieved through an experienced investment team it already knows well through its decade or more of allocations to Securis.

Additionally, the allocator notes the opportunity to invest in a fresh portfolio of ILS, with no investment positions that have any legacy exposure included in it.

Established ILS investors, like Prudential Portfolio Management Group’s allocation team, recognise the opportunity to provide fresh capital to back reinsurance in the wake of the major catastrophe losses, with the promise of benefiting from higher returns if the year ahead remains loss free.

Securis has capitalised on this investor appetite with its new Securis Event Fund. As we wrote almost a fortnight ago, the Health Care Foundation of Greater Kansas City also made a $10 million allocation to this same fund in time for the renewals.

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