Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

AIG’s AlphaCat sees ILS assets shrink $400m to $3.8bn in Q1 2021


American International Group’s (AIG) insurance-linked securities and collateralized reinsurance activities under its dedicated ILS investment manager entity, AlphaCat Managers, were impacted by losses during the first-quarter of the year it appears, while assets under management shrank by almost 10%.

alphacat-managers-logoInsurance-linked securities (ILS) assets under management at AlphaCat Managers fell by $400 million, from $4.2 billion at December 31st 2020, to $3.8 billion by March 31st 2021.

$3.7 billion of this is third-party investor assets.

It’s not clear whether the decline in assets under management was driven solely by catastrophe loss activity during the period, or whether there have been other effects, related perhaps to unwinding of trapped capital from prior year loss activity.

However, AIG has reported negative -$7 million of investment related expense from AlphaCat for the first-quarter of 2021, with losses the main driver.

AIG reports that its activities at AlphaCat Managers earned it $6 million of fee income from asset management activities during Q1 2021, which was down on the previous four-quarters where it earned $8 million in each.

This decline will be largely due to the reduction in assets under management at the ILS fund management unit.

But driving the expense from AlphaCat’s ILS activities for AIG was losses suffered during the period it seems.

AIG reported a -$13 million loss from from direct investment activities undertaken by AlphaCat Managers during Q1 2021, down significantly from the prior quarters positive $7 million investment profit and the prior year’s $2 million of investment related profit.

We can only assume that the AlphaCat ILS and collateralized reinsurance strategies were impacted by catastrophe loss activity during the first-quarter of 2021, likely driven in the main by the US winter storms and freezing weather in Texas, as the main cat loss event of the period.

It is possible there are some other effects, as we said perhaps from the unwinding of trapped capital related to prior year loss events. But we cannot be certain as AIG does not make detailed disclosures of AlphaCat performance unfortunately.

AIG reported elevated combined ratios for its General Insurance division in North America in Q1 2021, with the US winter storms the major driver of catastrophe losses during the period.

It’s likely this was also the main driver of current quarter loss activity for the AlphaCat ILS fund strategies.

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