Swiss Re Insurance-Linked Fund Management

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Entropics to specify responsible cat bond investments & SDG contributors


Entropics Asset Management AB, the Swedish manager of a catastrophe bond fund, has formalised its focus on cat bonds as responsible investments, as it specifies investments as such in its prospectus and expects to report how cat bonds it holds contribute to the sustainable development goals (SDG’s).

entropics-asset-management-logoEntropics, which is the first investment manager focused on insurance-linked securities (ILS) to be launched in Sweden, has been following a responsible investment strategy for some time now, taking a stand on cat bond investments that are sustainable and responsible.

It achieved this by stating that it would not invest in catastrophe bonds covering fossil energy production, or gambling, as well as becoming a member of the Swedish Sustainable Investment Forum (Swesif).

Now, Entropics aims to go further, by formalising its approach to responsible and sustainable cat bond investing within its fund prospectus.

Robert Lindblom, the CEO of Entropics, explained that the firm will “specify responsible investments in the prospectus,” which he believes to be “a first for a cat bond fund.”

The company has already put responsible investment key indicators into its monthly cat bond fund reporting, which define the purpose of the cat bonds it holds.

Currently this shows that 69.8% are providing property insurance protection, 11.1% mutual insurance protection, 13.5% cover an insurer of last resort, 1.4% cover public services and 4.2% provide risk capital for disaster relief purposes.

In addition the ILS managers monthly cat bond fund reports also show that zero percent of its holdings currently have any exposure to so-called “problematic entities”, which it defines through sponsors, domiciles, collateral currencies or collateral instruments.

Taking it even further, Entropics aims to report the contributions that catastrophe bond investments it holds make to the United Nation’s Sustainable Development Goals (SDG’s).

Lindblom explained, “The foundation of Entropics responsible style are the UN sustainable development goals (SDGs). Bonds in the portfolio of Entropics Cat Bond Fund are expected to contribute to these goals by providing insurance capacity.

“During the autumn, the responsible style of the fund will also be further emphasized in the reporting of the fund, where we aim to report contributions to the SDGs and to further improve our scrutiny of the firms (the sponsors) behind cat bonds.”

Insurance-linked securities (ILS), catastrophe bonds and other reinsurance investments contribute to the SDG’s in a number of ways, as they can be socially and environmentally responsible assets when linked to providing catastrophe insurance, disaster relief capital and capital that can strengthen resilience capacity to climate-related hazards and natural disasters.

Some key pension fund investors have already identified the ILS asset class as an example of a Sustainable Development Investment.

The steps Entropics is taking are positive in further confirming this and for investors looking for asset classes that are sustainable and responsible, this helps to further clarify that catastrophe bonds, insurance-linked securities (ILS) and other reinsurance investments can fit this description.

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