Florida State Board likely to reduce property cat ILS investments, keep diversifying

The Florida State Board of Administration, which manages allocations to insurance-linked securities funds and reinsurance strategies on behalf of the giant Florida Retirement System Pension Plan, has said it is likely to reduce its exposure to property catastrophe risk as expected mean loss returns have declined.

But, the investor that has somewhere north of $2 billion allocated across a range of ILS fund strategies for the giant Florida Retirement System Pension Plan is maintaining a focus on diversification within its allocations, with specialty lines one area continuing to be assessed for additional opportunities.

Returns have been strong for the Florida pension plan’s ILS investments, with a benchmark beating almost 22% running annual return across the strategies invested in.

The pension’s ILS investments are now running at an almost 18% annualised return over a three-year horizon, which is again ahead of the benchmarks it utilises.

As we’ve been reporting over the last year, the Florida State Board has been actively diversifying within the insurance-linked securities and reinsurance asset class, as it looks to create a more balanced portfolio with less weighting towards property catastrophe risks.

The fourth-quarter of 2025 saw the State Board allocating $400 million across a quota share reinsurance strategy managed by Tangency Capital and a specialty lines opportunity managed by Nephila Capital.

More recently, the Florida State Board disclosed a new $150 million allocation to the latest vintage of a life settlement strategy it had allocated to before, the Miravast ILS Credit Opportunities III LP fund.

As a result, the Florida Retirement System Pension currently has allocations to fund’s managed by Aeolus Capital Management, Pillar Capital Management, Miravast, three Nephila Capital strategies, RenaissanceRe Capital Partners and Tangency Capital.

In managing the allocation, the State Board is conscious of the softening seen in reinsurance and reductions in ILS spreads, which is serving to continue fuelling its desire to diversify, it seems.

At its latest investment advisory council meeting held in March, Trent Webster, Senior Investment Officer noted that performance has been particularly good for the ILS portfolio.

He explained, “Because we are further down the risk tower than many others, we’ve been performing exceedingly well in the second half of the year. So now we’re ahead in the one and three-year returns relative to our benchmark.”

Webster then stated at the March meeting, “We did add a few new funds, but we are now in the process of considering reducing our exposures to insurance simply because we’re finding the expected mean loss return to be declining. It’s still attractive, it’s still double digits, but it’s down maybe three or 400 basis points compared to about a year ago.”

In an upcoming meeting of the Florida State Board investment advisory council, members will hear that strategic moves are now seen as “likely” to reduce exposure to property cat risks, we understand.

Mean loss returns from the ILS and reinsurance investments are still seen as above average, but this is declining and as a result, the State Board will “likely reduce property cat risk” over the next 12 months.

However, the State Board is continuing to assess specialty lines opportunities, which suggests its focus on diversification within ILS and reinsurance persists.

As a result, there may be some adjustments made to the overall portfolio holdings at this time, but it seems likely the Florida state pension will maintain a meaningful allocation to ILS and reinsurance, as it recognises the benefits this delivers to its total portfolio approach.

Recall that, the Florida Retirement System Pension Plan saw its allocation to insurance-linked securities funds and reinsurance strategies rising to make up 1% of total pension fund assets by the end of 2025, which equated to around $2.23 billion invested.

The ILS portfolio stood at around 0.9% of the total pension fund as of March 31st, which remains somewhere north of $2 billion, we understand.

View details of major pension fund and sovereign wealth investors in ILS and reinsurance in our directory.