Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

ILS Capital Management delivered double-digit 2018 return to pension investor


While negative performance of ILS and collateralized reinsurance portfolios has been the talk of recent months, after the consecutive years of catastrophe loss activity, as ever performance is divergent in this market and ILS Capital Management was one of those that fared better in 2018.

ILS Capital ManagementBermuda headquartered ILS fund and investment manager ILS Capital Management Ltd. once again demonstrated just how attractive insurance and reinsurance linked investing can be in 2018, delivering a double-digit return for an investor despite the impact of losses.

In an interview with Chief Investment Officer, Bob Jacksha, CIO of the New Mexico Educational Retirement Board, a near $13 billion pension fund for the state’s education employees, said that an allocation to insurance-linked securities (ILS) managed by ILS Capital Management delivered it an 11.4% return in 2018.

It’s important to note that this 11.4% was the annual return achieved from an investment made into ILS Capital Management’s flagship 1609 Fund at January 1st 2018, so only based on exposure to any losses that occurred during that year and with no exposure to prior events, or cash drag due to trapped collateral etc.

ILS Capital Management, which was launched in 2011 by veteran reinsurance executive Don Kramer, invests across a wide range of insurance and reinsurance linked assets.

The flagship 1609 Fund allocates its capital across lines of reinsurance business including specialty and property risks, making investments in areas of the market such as marine, energy, aviation and crop the 1609 Fund provides a good example of how a diversified approach targeting double-digit returns could deliver in 2018, despite the impacts of hurricanes, typhoons and wildfires.

The New Mexico Educational Retirement Board currently has a roughly $110 million allocation to the ILS Capital Management 1609 Fund Ltd., which it began investing in at the start of 2018.

The pensions reports that it made an 11.4% return on that investment through 2018, but the actual gross performance of the underlying reinsurance contracts in the 1609 Fund portfolio was actually 14.3%, we understand.

Investors who were exposed to prior year events and side-pocketed losses will not have fared as well, but we understand it was still a positive outcome for every investor in the 1609 Fund in 2018, which is an achievement for the managers and highlights how ILS is still attractive even during a period of some of the worst losses on record.

Jacksha places ILS and reinsurance investments within his “other diversifying strategies” bucket in the pension funds portfolio.

Clearly timing is everything, as had Jacksha allocated for 2017 his returns may not have been so impressive. But overall the ability to deliver double-digits in a year like 2018 is impressive, even for a fresh investor, as other ILS fund strategies did not fare as well.

Of course strategy is everything as well and ILS Capital Management’s focus on risks outside of just pure property catastrophe risks clearly helped it in delivering this return in 2018.

It shows that while some investors just seek exposure to catastrophe risk, a broader approach also has its merits. As it can help to insulate you from losses when one line of insurance or reinsurance business is hit particularly hard during any specific year.

Register today for ILS Asia 2023, our next insurance-linked securities (ILS) market conference. Held in Singapore, July 13th, 2023.

Artemis ILS Asia 2023 - Insurance-linked securities conference in Singapore

Get a ticket soon to ensure you can attend. Secure your place at the event here!

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.