A new dedicated insurance-linked securities (ILS) management division has been launched by specialist motor-focused insurer ERS, with former Securis executive Neil Strong taking the lead role as CEO ILS.
ERS has a long history in the motor insurance space but has been branching out into specialty lines and also reinsurance, with one of the most recent example of this being its move to back the Arcus 1856 syndicate at Lloyd’s, taking over the operation from the Credit Suisse Insurance-Linked Strategies (ILS) team.
We understand that insurance-linked securities (ILS) and collateralised reinsurance underwriting and capital management are seen as both a growth opportunity and a way to diversify further away from the traditional ERS Lloyd’s motor focused book, while leveraging efficient capacity sources, providing broad benefits to the group.
The move into insurance-linked securities (ILS) at ERS comes on the back of expansions into Property, Reinsurance, Marine, Professional Lines and Specialty lines.
ERS’ ILS offering is going to be fully integrated into its business, with three main ILS fund strategies to be launched and offered to investors.
These will include: an open-ended ILS fund mandate with a strategy to allocate capital across both public, private and non-life ILS, with semi-annual liquidity; a closed-ended, higher risk and higher target return ILS fund; and a liquid catastrophe bond fund mandate.
As said, Neil Strong, formerly of Securis Investment Partners, joins ERS as CEO ILS, alongside Fergus Reynolds, also formerly of Securis, who joins as CUO ILS, with additional support from Sandro Kriesch, a Founding Partner at ILS manager Twelve Capital in Zurich.
The depth of experience in this launch team is significant, as too are the connections to both sources of origination of reinsurance and retrocession business and connections to third-party capital investors.
ERS Group CEO, Peter Bilsby commented on the launch, “I am delighted that Neil, Fergus and Sandro have joined the team to set up our ILS offering. A (re)insurer aligned ILS platform will give us the ability to offer cedents the full suite of risk transfer solutions and institutional ILS investors the best access to risk with the flexibility to invest across a range of ILS opportunities.”
Strong, the incoming CEO for ILS, added, “Fergus, Sandro and I are excited to support the expansion and build out a compelling proposition. The current environment sees investor appetites returning for insurance linked returns. ILS investors are now focusing on quality as they move allegiances towards managers that can provide the access to business that they want, but with more liquidity.”
ERS wants its ILS division to be a legacy free, fully reinsurer aligned platform, that benefits from origination from across the wider ERS business.
Reynolds commented, “The lack of legacy issues will give us significant opportunities to provide solutions to cedants and attractive portfolios to institutional clients. Our ability to leverage the ERS platforms will allow us to offer portfolios to investors that reduce the risk and the impact of trapped capital that causes such a negative drag on investors’ returns. I’m thrilled to be joining the team and can’t wait to get started.”
Kriesch added, “There are relatively few (re)insurer aligned ILS platforms that offer much more than a simple sidecar strategy so this approach, which will have technology at its core, will enhance and streamline the interaction with investors and provide reporting transparency that is often missing in the market.”
As ERS expands its underwriting remit to include a broad range of specialty and commercial insurance and reinsurance lines, the addition of a third-party and ILS capital management division should enable it to realise greater synergies and efficiencies across its growing book of business.
The ERS ILS division will be able to put capital to work on its own, as well as alongside the rest of the ERS business it seems, which should include having advantaged access to business from the Lloyd’s market through the syndicates.
That should make the task of origination both simpler for the new ERS ILS division, as well as giving it deeper and more direct reach into sources of reinsurance risk for its private ILS focused and higher risk ILS fund strategies.
Investors are looking for differentiation in ILS managers today and access to risk is a really important one, as too is alignment.
With ERS being new to ILS, it seems its nascent ILS platform will have an opportunity to build something quite compelling, with the benefits of aligned access to business, as well as an independent and legacy free approach.
We understand there is a desire to also offer something aligned with investors ESG goals in future through the ERS ILS division, which perhaps reflects recent work that Strong has undertaken for the UK based Natural Disaster Fund, which is managed by Global Parametrics.