Elementum Advisors, LLC, the insurance-linked securities (ILS) investment fund manager and collateralised reinsurance underwriter, is to benefit from a further $100 million investment into its range of ILS funds from stakeholder and key investor White Mountains.
We understand this new investment into Elementum’s range of ILS funds, which include catastrophe bond strategies and broader collateralized reinsurance, is slated for the 2023 underwriting year.
However, already $70 million of this new investment from White Mountains has been funded, we understand, with this extra capital allowing Elementum to take advantage of harder reinsurance rates around the renewals this year.
The additional $30 million of capital is set to be funded as underwriting and investment opportunities look most attractive to Elementum, so we’d imagine that could be in advance of the April or June reinsurance renewals.
Recall, insurance and reinsurance focused investor and holding company White Mountains acquired its stake in ILS fund manager Elementum Advisors back in May 2019.
The company paid $55 million for a 30% stake in Elementum, which valued the ILS fund manager at roughly $183 million.
White Mountains then followed up on the acquisition of a stake in the ILS manager, by allocating $40 million to Elementum ILS funds and then topping that up with another $10 million in time for the January 2020 reinsurance renewals, taking the total it had previously invested in the ILS funds to $50 million.
Having at first reported the carrying value of its investment stake in Elementum Advisors at $55.1 million back at the end of 2019, the year of its acquisition, this investment stake which remains valued as a 29.7% ownership interest, had fallen in value to $45 million at the end of 2021 and now to $30 million at the end of 2022.
It’s not immediately clear why White Mountains has cut its valuation of what was a 30% ownership stake so significantly, but losses and a decline in assets under management (AuM) could be the driver.
Valuation aside, it’s clear White Mountains continues to place significant value on its stake in the ILS manager and as a result is happy to deploy more capital into Elementum’s range of ILS funds, as this new $100 million allocation makes evident.
White Mountains has also demonstrated its appetite for reinsurance-linked returns through its recent investment into a new collateralized reinsurance sidecar sponsored by Ark Insurance Holdings, the Outrigger Re vehicle.
Upsizing its investment into the Elementum ILS funds will give White Mountains another avenue through which it can capitalise on the hardening of reinsurance prices, while backing and boosting the assets of the ILS manager it has an ownership stake in.
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