ILS P&C run-off fund invests in Italian med-mal, US general liability

The property & casualty run-off focused insurance-linked investment fund linked to Credit Suisse and sub-advisor ILS Investment Management (ILSIM), completed a number of new transactions at the beginning of this year.

The latest annual report from one of the reinsurance underwriting vehicles used by the run-off and legacy risks focused insurance-linked investment strategy shows that Italian medical malpractice and U.S. general liability investments were made, as well as agreements to secure legacy risks from prior year portfolios.

Credit Suisse and ILS Investment Management, an insurance-linked investment focused asset manager owned by the Bermudian legacy and run-off specialist Armour Group, launched their first legacy P&C focused ILS fund in Autumn 2014 with $576m of committed capital to invest in run-off business.

That fund successfully ran its course, leading to a second iteration of the run-off focused ILS fund being launched for 2018 that raised somewhere around the $700 million to $800 million mark, we understand.

It’s clear that the fund’s assets have been put to work in a range of longer-tailed transactions, including some that it entered into in early 2019.

According to the annual report of reinsurance underwriting vehicle ILS Property and Casualty Re II Limited, the fund allocated to a transaction in January that featured US general liability, commercial package including and excluding US wind cover and miscellaneous professional and liquor liability risks.

This transaction featured a quota share arrangement with Armour Re, the reinsurance underwriting vehicle of ILSIM parent Armour Group, covering a portion of a loss portfolio transfer arrangement on those risks.

ILS P&C Re II funded almost $83 million for this US general liability transaction alone.

In February the vehicle then underwrote and allocated capital, again through a quota share on a loss portfolio transfer with Armour Re, to a portfolio of Italian medical malpractice liability risks. This deal saw ILS P&C Re II funding just $16.3 million.

Also in 2019, the vehicle entered into an excess of loss agreement with Aon’s segregated cell vehicle White Rock Insurance (SAC) Ltd., to cover legacy risks related to its first fund portfolio. That agreement, with a third-party provides $80 million of coverage to the portfolio, which will be gradually run-off over time.

Previously, the vehicle had underwritten UK commercial motor, public and employer’s liability lines of business, other motor lines, property related to the motor business, workers compensation, errors & omissions and other property lines.

A diverse array of mid to longer-tailed insurance risks, that provide a valuable diversifying investment opportunity to the institutional investors with the horizon and appetite to invest in run-off and casualty ILS transactions.

The ILS P&C Fund strategy from Credit Suisse and ILSIM is still a relatively unique offering for ILS investors, a differentiated strategy based on run-off portfolios and casualty line of business risks.

With Armour Holdings onboard, it is managed by one of the top firms in the legacy and run-off market.

Which is key, as the expertise in acquiring and managing run-off business is vital for a strategy like this ILS fund, given it is an entirely different proposition to managing a portfolio of one year reinsurance contracts, as is more typical of the ILS market.