Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Abu Dhabi Investment Authority expanded its ILS portfolio in 2020


The Abu Dhabi Investment Authority (ADIA), a sovereign wealth investment fund owned by the Emirate of Abu Dhabi and tasked with investing funds on behalf of the Government of the Emirate, expanded its insurance-linked securities (ILS) allocations last year, as it put an increasing emphasis on asset classes that offer relatively uncorrelated returns.

abu-dhabi-investment-reinsuranceADIA first allocated to the insurance-linked securities (ILS) market back in 2019, putting around $550 million into deployments across a range of ILS fund managers, across catastrophe bonds, collateralized reinsurance and also possibly retrocession.

In 2020, ADIA’s Alternative Investments Department (AID) completed more transactions than in any previous year, as the sovereign wealth investor placed a growing emphasis on sourcing diversified returns from new and niche asset classes.

As we’ve explained before, ADIA has been interested in accessing risk-linked returns from across the reinsurance and ILS spectrum, seeing its ILS fund allocations as a foundational start.

The investor has also been linked with initiatives to launch new reinsurance start-ups recently as well.

ADIA has an Emerging Opportunities mandate, for niche alternative asset classes such as ILS, through which it looks to generate returns from newer asset types it is trialling, or looking to expand into.

ADIA said today that in 2020 its Emerging Opportunities mandate, which sits outside of its main and traditional hedge fund allocation, made several new investments during the year.

Among these were an expansion of its insurance-linked strategies portfolio, although at this time we’re not sure how meaningful this was in dollar terms.

ADIA said of its Emerging Opportunities mandate, “The team will continue its research into sources of return with low correlation to traditional asset classes that otherwise would not fit into ADIA’s portfolio.”

Adding that, on alternatives in general, “AID will continue to optimally position its portfolio in order to generate returns uncorrelated to more traditional assets classes, providing diversified and enhanced risk adjusted returns to ADIA’s overall portfolio.

“The Department will maintain its focus on working with both established and new funds, as well as top tier managers, particularly those with clear focus on repeatable processes, state-of-the-art execution and strong data capabilities.”

Given the opportunities in reinsurance and insurance-linked securities (ILS) continue to be attractive for large investors, especially the broadly diversified that have a low cost-of-capital, it is likely ADIA will continue to build on its foundational ILS allocations over the coming years for the Abu Dhabi wealth funds.

The Abu Dhabi Investment Authority also has major holdings in some existing traditional reinsurance players, including Fidelis which it invested in last year, and pension risk transfer specialist Pension Insurance Corp.

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