Insurance and reinsurance firm Hiscox is expanding its insurance-linked securities (ILS) capabilities with the addition of a collateralised reinsurance offering, to complement its existing flagship Kiskadee ILS funds which already have over $1 billion of capital invested in them.
Hiscox is also rebranding its ILS capabilities under Hiscox Re Insurance Linked Strategies, a group that will manage the Kiskadee ILS funds as well.
To date, the Kiskadee funds have featured insurance and reinsurance risks fronted via the Hiscox Re balance-sheet, where as the new offering which is set to launch for the 1st January 2017 renewals, will be a directly collateralised reinsurance offering, rather than via rated Hiscox paper.
The fronted structure delivers benefits in terms of being able to develop a fully diversified global portfolio of risks, with the efficiency benefits of the capital being behind Hiscox rated paper.
However, Richard Lowther, Chief Operating Officer of Hiscox Re Insurance Linked Strategies, told Artemis that some investors have “A preference for more concentrated portfolios where fronting is not necessary, therefore saving the investor the cost of fronting fees.
“In such cases having the ILS investor vehicle directly face the market backing trades with cash in a trust is desirable. The launch of a collateralised capability will be a new structure with an underwriting strategy that reflects this.”
The newly branded ILS unit at Hiscox will continue to provide capacity to Hiscox Re and the reinsurer will remain the primary contact for reinsurance brokers and clients.
The collateralised reinsurance ILS capability is expected to complement its existing single investor funds and managed accounts, as well as the two successful and growing Kiskadee flagship funds.
Jeremy Pinchin, Hiscox Re CEO, commented on the news; “We are beginning to write the next chapter of our already hugely successful ILS business. The intended launch of a collateralised reinsurance ILS capability will add further options to investors, clients and brokers whilst being complementary to our existing funds.”
Richard Lowther as Chief Operating Officer and Michael Jedraszak as Chief Investment Officer for Hiscox Re Insurance Linked Strategies, will both report directly to Pinchin and continue to lead the development of the ILS business at Hiscox.
“While the rebrand under Hiscox Re Insurance Linked Strategies reflects the growing independence of this area of our business, our mandate continues to be to provide attractive and diverse ILS investment opportunities for our investors which also meet the broader needs of Hiscox Re’s clients. The new collateralised reinsurance ILS capability will help do exactly that,” Lowther said.
The addition of a directly collateralised reinsurance offering will also add flexibility to the ILS unit, and to Hiscox, as well as additional strategy and return offerings for institutional investors.