The Blue Capital Global Reinsurance Fund, a London and Bermuda stock exchange listed reinsurance and retrocession linked investment fund, achieved an 8.26% return for 2016 despite some attrition from catastrophe losses during the year.
The fund, which is operated by Bermudian reinsurance firm Endurance through its ILS and third-party capital management subsidiary Blue Capital Management, reported a December performance of 0.91% today, which takes its full-year 2016 return to 8.26%.
This compared to a 9.6% return in 2015, but with reinsurance and insurance-linked securities pricing having continued to decline through 2016 and catastrophe or severe weather losses being higher, the reported performance for the year is still very attractive.
The Blue Capital Global Reinsurance Fund revealed some impacts due to catastrophe and severe weather events in the first-half of 2016, reserving for losses it expected to suffer to its portfolio of reinsurance contracts. In fact the manager revealed that it had incurred $7.437 million of catastrophe losses and loss adjustment expenses in the first-half of 2016 alone.
Blue Capital Management explained that its diversified portfolio was particularly important this year, helping it to continue to deliver investor returns even in a more attritional loss environment.
The ILS fund also suffered a hit from hurricane Matthew, reporting a -0.2% performance for October 2016 as a result of the storm’s impact on the Bahamas, Florida and the U.S. southeast.
But, given the focus of the Blue Capital Global Reinsurance Fund on peak zone catastrophe reinsurance and retrocession contracts these impacts are no surprise, in a year when the insurance industry has seen its highest level of catastrophe industry losses in four years.
On that basis and considering these impacts, ILS funds continue to demonstrate their value and why they are attractive to institutional or third-party capital investors, as delivering an 8%+ return in a year of slightly more elevated market losses is impressive.