Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Clariden Leu temporarily suspend new subscriptions to catastrophe bond funds again


Clariden Leu, one of the leading investment managers targeting catastrophe bond opportunities, has again closed some of its insurance-linked securities and cat bond funds as primary market issuance has failed to deliver enough capacity to keep up with capital inflow. In June 2010 Clariden Leu closed their flagship cat bond funds to new subscriptions citing the same reason, they later reopened them to new investors in November.

A product flash published by Clariden Leu explains the situation. They say that their cat bond funds have received ‘exceptionally high inflows of assets in recent months’ and that the positive growth of the funds have not been matched by primary market cat bond issuance levels. They say that due to the lack of new issuance it would be difficult to maintain their objectives of offering attractive, risk-adjusted returns on a well diversified portfolio especially given the high inflows of assets they expect going forwards. They also don’t want to risk any dilution in their funds performance. As a result they won’t be accepting any new subscriptions until further notice.

This clearly shows that catastrophe bond investment strategies are receiving great interest again this year and it’s a shame that the market cannot meet investors demand through primary issuance. This situation, of investor demand outstripping primary market supply, could result in further issuances of private ILS transactions designed purely to soak up available investor capital. Clariden Leu themselves issued a ‘cat bond lite‘ last year as a way to create investment capacity for potential clients.

You can see which of Clariden Leu’s catastrophe bond funds have been closed on this page on their website. Opportunities for investors looking to access insurance-linked investment strategies with Clariden Leu still exist as a number of other funds, including their ILS Plus Fund, remain open to new subscriptions.

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