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Hannover Re backed insurance-linked securities (ILS) fund open to investors


The insurance-linked securities (ILS) fund management operation backed by German reinsurer Hannover Re is now up and running and open to investors. Luxembourg based asset management firm Leine Investment SICAV-SIF and managing partner Leine Investment General Partner S.à r.l. were established last year as 100% subsidiaries of Hannover Re with the aim of launching ILS funds and accepting third-party investment capital.

With the launch of Leine Investments reinsurer Hannover Re was looking to take advantage of its own track record in investing in catastrophe bonds and insurance-linked securities, something the reinsurer had managed internally for a number of years. In launching Leine Investments it has turned what was its own private ILS fund into a public one able to accept third-party capital. This sees Hannover Re join many other reinsurers who have been making reinsurance-linked asset management a larger part of their business.

As we wrote about the forthcoming fund back in October here, Hannover Re aimed to transfer $150m of capital invested in their internal ILS fund into the new public Leine Investment fund structure. Along with the capital the track record of the internal fund could also be transferred giving the new fund a leg up in the sometimes tricky game of fundraising for new entrants to the ILS fund management market.

According to an article (in German) on fund management news website FONDS professionell Online the first fund is now open to qualified investors and is called the Leine Investment SICAV-SIF Insurance-Linked Securities Sub-Fund 1. The fund mainly invests in catastrophe bonds according to the article, although it will likely augment that with insurance-linked swaps and other collateralized reinsurance and catastrophe risk instruments as required.

The article says that the investment strategy of Leine Investment is based on the internal ILS and cat bond portfolio of Hannover Re, which since its launch in March 2008 has returned an annualized 7.34% as of the end of 2012. That gives the new third-party investment offering an admirable track record which with the backing of Hannover Re, one of the largest reinsurers in the world, is sure to prove popular with investors.

Warburg Invest, a  division of the privately owned Warburg bank, will provide fund administration and distribution services to the Leine Investment ILS fund. With Leine Investment General Partner S.à r.l. acting as portfolio manager for the fund, the offering has the underwriting and reinsurance skills of the reinsurer to back up its investment decisions as well.

Hans-Jürgen Schäfer, Managing Director of Warburg Invest, is quoted in the article as saying (translated from the German original); “The low correlation to other asset classes as well as the attractive yield expectations have led to an increased demand from professional investors for insurance-linked securities. With the launch of the fund, we can respond to this.”

Commenting on the benefits of having the backing of a reinsurer with the pedigree of Hannover Re, Schäfer continued; “The evaluation and selection of titles within this special investment universe, however, requires a high level of specialized knowledge. Hannover Re, the world’s first initiator of a catastrophe bond is the ideal partner for us.”

Hannover Re are an anchor investor in the new fund, through the transfer of capital from its internal ILS and cat bond fund.

Read our article on the launch of Leine Investment, written in October 2012.

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