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Ariel Re signs up to SBAI, cites Lloyd’s as alternative to ILS manager structures


Specialty reinsurance firm Ariel Re has cited allocating capital to the Lloyd’s marketplace, through an entity such as itself, as a “compelling alternative to ILS investment manager fund structures,” as it announced becoming a Signatory of the Standards Board for Alternative Investments (SBAI).

ariel-re-logoIn the insurance and reinsurance world, Ariel Re is now the first non-ILS investment manager to become a Signatory to the SBAI.

Ariel Re operates its reinsurance business through through Lloyd’s, while it has offices in Bermuda, London and Hong Kong.

The company is launching and waiting for approval of its new Ariel Re Managing Agency (ARMA), which will be a regulated entity governed by the Lloyd’s Market Oversight Framework.

As a result, it seems Ariel Re is keen to push itself into the spotlight as a business that can manage third-party investor capital and connect that to reinsurance risks it has underwritten.

Ariel Re notes that the SBAI assessed that the Lloyd’s Market Oversight Framework aligns with its own high governance and fiduciary standards this year, opening the door for managing agents to become signatories to its framework of Alternative Investment Standards.

The reinsurance firm joins a number of ILS fund managers, but is the only non-investment manager entity that offers reinsurance-linked investment opportunities to third-party investors to have signed up.

“As a Lloyd’s-centric reinsurance group that uses alternative sources of capital, we are delighted that the SBAI has accepted Ariel Re’s application,” Tim Shreeve, Head of Platform Development at Ariel Re said. “The governance and disclosure standards at Lloyd’s align well with the SBAI’s standards designed for alternative investment management.”

“We believe that our Signatory membership highlights Lloyd’s as an excellent place for investors to make capital allocations to insurance risk. It demonstrates that Lloyd’s has embedded fiduciary safeguards and is a compelling alternative to ILS investment manager fund structures,” Shreeve added.

The development of new routes to allocate capital into the Lloyd’s market, especially the launch of the second ILS structure, London Bridge 2 PCC, which opens up a greater range of options for investors and capital managers to do what is effectively insurance-linked securities (ILS) business in, or with, the Lloyd’s market’s participants.

For Ariel Re, these developments likely help it to expose more of its risk to investors, in additional ways and may make bringing capital into its business a more efficient process as well.

So, perhaps it should be surprise that the reinsurance firm is looking to raise its profile in front of investors interested in ILS and reinsurance-linked returns?

Which is something we have been anticipating, a growing competition for investor dollars in the ILS and reinsurance space, as efficient capital remains as important as ever, perhaps even more so in a harder market environment.

Meaning managers and re/insurers looking to bring in institutional capital, will need to be able to explain the differences in structures and the benefits of one route, such as via an ILS fund manager, over an allocation via a Lloyd’s ILS structure, a managing agent or member, or other investment vehicle of one sort or another.

“This pioneering new approach from Ariel Re aligns well with one of the key deliverables of the Future at Lloyd’s Strategy; to enhance the accessibility of Lloyd’s for new investors. As well as confirming the similarity between the role of the managing agency and an alternative investments fund manager it reinforces the additional comfort that investors can gain from the oversight provided by the Corporation,” Lloyd’s CFO and COO Burkhard Keese added.

Importantly, options for investors are growing and these options also benefit the broader ILS market too, with established ILS fund managers now able to access and trade with Lloyd’s entities much more easily as well, making that market generally far more accessible.

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