Hiscox expects $1bn+ of ILS assets for Kiskadee in 2016

Specialist global insurance and reinsurance group Hiscox expects assets under management at its insurance-linked securities (ILS) fund and reinsurance linked investment strategies unit Kiskadee Investment Managers will pass $1 billion in 2016.

At the latest count, as reported by Artemis on the 9th February 2016, Kiskadee had increased its insurance-linked assets to an impressive $850m.

Approximately $750m of the ILS assets managed are almost evenly split across the two flagship Kiskadee funds, the Kiskadee Diversified Fund and the higher risk/return Kiskadee Select Fund.

The remaining roughly $100m is allocated to Kiskadee’s new special purpose reinsurance vehicle, Cardinal Re, which the ILS investment manager launched in September 2015.

In the Hiscox Group annual results announcement this morning, the company explains that further growth is both desired and expected, with $1 billion now within reach.

Chairman of Hiscox Group, Robert Childs, commented; “Kiskadee, our Insurance Linked Securities (ILS) business, is on track to reach US$1 billion of funds in 2016.”

Chief Executive, Bronek Masjoda, also said; “Hiscox Re continued to evolve whilst making a material profit contribution, with Kiskadee, our Insurance Linked Securities business, expected to manage US$1 billion by the end of 2016.”

Hiscox Re is the home of the group’s reinsurance and insurance linked security activity. Here diversity is becoming key for Hiscox, with new activities in reinsurance along with the ILS activity at Kiskadee all helping the firm to navigate the softened and evolving reinsurance market.

“Income from Kiskadee, helped to offset the reductions in US property catastrophe reinsurance,” Masjoda explained.

And the importance of third-party capital and ILS at Hiscox is clear and growing, as Kiskadee reaches scale. The income returned to the group, in the form of profit shares, fees and also from its own investments in the Kiskadee funds will become increasingly meaningful as total assets managed grows.

“We continue to leverage third party capital through quota share arrangements (with other insurers) and through ILS activity (with capital markets investors). This gives us the ability to remain agile and relevant as we can offer larger lines and bespoke reinsurance solutions to a broad spectrum of clients,” Masjoda continued.

“In two years, our ILS business including our flagship Kiskadee funds has grown to be a significant brand in the market. In 2015, we also launched Cardinal Re Ltd, a Bermuda-domiciled Special Purpose Insurer designed to transform collateralised insurance and reinsurance risk into a security more suited for capital market investors. Kiskadee Investment Managers’ assets under management are on track to reach US$1 billion in 2016,” he said.

Kiskadee more than doubled its assets managed in the last year, rising from from $400m at the January 2015 reinsurance renewal and now reaching $850m at the recent January 2016 renewal season, so reaching $1 billion in 2016 seems almost a certainty.

With impressive performance achieved in 2015, with the lower risk Kiskadee Diversified Fund seeing a net return of 6.56% for the year and the higher risk/return Kiskadee Select Fund 11.12%, investors will likely find the Hiscox ILS offering among the most compelling in the market right now.