Blue Capital Management, the insurance-linked securities (ILS) and collateralized reinsurance investment manager of the Blue Capital Global Reinsurance Fund, witnessed moderating conditions at the key June renewal, with prices down only 4% across its renewal portfolio.
London and Bermuda listed reinsurance and insurance linked investment fund the Blue Capital Global Reinsurance Fund renews a large chunk of its portfolio each June, the renewal season when much of the wind exposed U.S. catastrophe reinsurance contracts are negotiated.
As a result the investment manager, Blue Capital Management Ltd., a subsidiary of Bermudian reinsurance firm Montpelier Re and soon to become a part of Endurance once the merger between the two is completed, has to provide an update for investors in the Fund on its renewal progress.
One of the key factors affecting the market in recent years has been over-capacity at these renewals, leading to high levels of competition between traditional and alternative or ILS markets, but discipline and new demand appear to have moderated conditions this year.
“Overall, following two years of aggressive price reductions due to an overabundance of capital, we witnessed a market showing signs of nearing a bottom with pricing down only 4 per cent. compared to last year on a risk adjusted basis,” commented President and CEO of Blue Capital Management Ltd. Bill Pollett.
“The stabilizing pricing environment was influenced in part by increased demand of approximately US$4 billion coming from both the Florida Hurricane Catastrophe Fund, which bought protection for the first time ever, and from insurance companies purchasing additional protection,” he continued.
There is increasing evidence that discipline has emerged across the market, both on the ILS and traditional side of the market, resulting in a push-back on overly large price reductions and helping to bring some stabilisation to pricing, particularly on wind exposed programs.
“There was also evidence that the reinsurance markets, both traditional and alternative, have started pushing back at overly aggressive price decreases advocated by the broker community with some programs not being completed on first attempt having to be re-priced to secure the required capacity,” Pollett explained.
For the Blue Capital Global Reinsurance Fund this stabilisation will be viewed as positive over the coming year, enabling the managers to build a portfolio which meets their target return profile.
Pollett said; “Blue Capital was well positioned to take advantage of these market dynamics, constructing an attractive portfolio.”
Blue Capital, with its range of institutional and retail investment products focused on catastrophe reinsurance-linked investment products which include the listed Global Reinsurance Fund, the NY stock exchange listed Blue Capital Reinsurance Holdings Ltd. and other institutional funds and mandates, is well positioned for future opportunities.
The manager has built a diverse platform of opportunities to suit a range of investors, which should enable it to capitalise on the growing interest in ILS and reinsurance as an asset class.
The forthcoming merger with fellow Bermudian reinsurance firm Endurance should assist with continued growth, as well as perhaps opening opportunities to broaden its coverage of risks and perils.
Also announced yesterday, the Blue Capital Global Reinsurance Fund has, effective 8th July 2015, appointed S. George Cubbon as an independent Director.
Cubbon, who retired from American International Group (“AIG”) in 2012 after over 30 years of service including serving as President and CEO of American International Company Limited, replaces Neil W. McConachie who resigned from his position as a Director in June due to his role in the Fidelis start-up.
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