As the COVID-19 pandemic impact spread around the world and through insurance and reinsurance during the first-half of 2020, the insurance-linked securities (ILS) fund management business of Elementum Advisors, LLC was “not significantly impacted” according to key investor White Mountains.
White Mountains again highlighted the benefits of ILS as an asset class, in the lack of correlation ILS and reinsurance linked investments have shown to global financial market movements caused by the pandemic.
“During the second quarter and first six months of 2020, Elementum’s business was not significantly impacted by the COVID-19 pandemic and is expected to have low correlation with the broader macroeconomic cycle and financial markets,” the company explained in its recent 10Q report.
White Mountains invested in ILS fund manager Elementum Advisors in May 2019, confirming the news that we originally reported in April of that year.
The company paid $55 million for a 30% stake in Elementum, which valued the ILS fund manager at roughly $183 million. White Mountains then allocated $40 million to Elementum ILS funds, topping that up with another $10 million in time for the January 2020 reinsurance renewals.
As of the mid-point of 2020, White Mountains’ investments across four of Elementum’s ILS funds were valued at $52.1 million, having appreciated somewhat since the time of the allocations.
COVID-19 and its impacts to the global financial markets has not unduly affected the insurance-linked securities (ILS) and collateralized reinsurance fund management operations of Elementum at this time, it seems.
But White Mountains did acknowledge how the global pandemic can affect investor appetites and flows, which could have ramifications for its investment in Elementum should the Covid-19 situation worsen at all.
“In the near term, Elementum’s AUM and revenues may increase or decrease as institutional investors rebalance portfolios or seek liquidity as they assess the ILS and investment markets more broadly,” the company said.
At the moment the main impact to ILS markets from the pandemic appears to be in relation to capital raising, as global institutional investors cautiously assess new allocations at this time.
As we explained recently, the majority of ILS fund managers we had spoken with strongly believe that the business interruption issue, related to insurance and reinsurance coverage and the pandemic, is expected to only be a minimal hit to their ILS strategies and ILS portfolios.
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