The Healthcare of Ontario Pension Plan (HOOPP), a large Canadian institutional retirement fund, has more than doubled its investments in the insurance-linked securities (ILS) asset class over the last year.
Insurance-linked securities (ILS), so investments into insurance-linked funds as well as some other reinsurance related securities, began in earnest for the Healthcare of Ontario Pension Plan (HOOPP) in late 2019.
Then in early 2020, HOOPP employed Bernard Van der Stichele, an experienced ILS and reinsurance sector executive, as a Portfolio Manager for its new Insurance-linked Securities investment program earlier this year.
The move into insurance-linked securities (ILS) and reinsurance related assets was timely, as HOOPP had been shifting from its equities focus into a range of alternative asset classes including insurance-linked securities (ILS), as a way to help soften the blow of the market volatility seen as a result of the Covid-19 coronavirus.
Which may go some way to explain the increase in allocations to ILS during 2020.
At the end of 2019, HOOPP had allocations with a fair value of C$260 million in insurance-linked instruments.
Over the course of 2020 that allocation has seemingly more than doubled, with the pension plan reporting the figure as having reached C$549 million at the end of last year (roughly US $440m).
The allocation to what appears to be a mix of ILS funds and some direct investments into reinsurance related securities, equates to just 0.5% of HOOPP’s overall C$104 billion of pension plan assets.
Overall, HOOPP has reported that this huge asset haul had generated an 11.42% rate of return in 2020, while its assets grew over 10.5% in the year to reach the C$104 billion mark.
HOOPP said that it “continues to evolve its investment strategies to adapt to the current low interest rate environment,” and that this includes adjusting its asset composition and finding new ways to diversify the pension portfolio.
Here, the ILS and reinsurance related investments will be playing a valuable role for the pension plan, and given HOOPP said it “takes a long-term view” suggests the pension may continue to build on its allocation to the ILS sector.