ILS & reinsurance add to Bermuda investment fund growth through 2020

Bermuda has benefited from a robust year for insurance-linked securities (ILS) and other areas of reinsurance related investment through 2020, with assets under management of investment funds located in the domicile increasing during the year, as new private and closed fund structures have also been established.

There appears to have been some shifting of assets to Bermuda over the course of 2020, with some of our contacts on the island suggesting that Bermuda has been seen as a secure domicile over the course of what has been seen as a challenging year globally in investment markets, due to the pandemic.

While there haven’t been many insurance-linked securities (ILS) fund manager start-ups during the year, there have been a raft of new ILS fund structures established to support existing fund managers and also the operations of traditional reinsurance firms managing third-party capital.

The latest figures from the Bermuda Monetary Authority (BMA) show a strong increase in fund numbers up to the end of the third-quarter of 2020, with the total number of investment funds domiciled on the island rising by over 8% that quarter to reach 708.

The category of investment funds that saw the most activity in Q3 were the professional closed funds, a category that counts a significant percentage of its assets as hailing from ILS investment activities and other reinsurance related investments.

22 of these professional closed funds were established in Bermuda during Q3 2020 alone, while the island also saw 7 new private fund structures set up, another category popular with ILS managers and reinsurance companies.

Over the course of 2020 the number of investment funds registered in Bermuda has risen by almost 12%, while at the same time the overall net asset value of investment funds located in Bermuda increased by over 12% across the first-nine months of 2020 and by over 5% in Q3 alone, to end that quarter at $197.68 billion.

The BMA cites both increased subscriptions to Bermuda funds, as well as appreciation in the assets held in them as driving the net asset growth.

It’s certain the activity in registering new investment funds over the course of 2020 will drive the net asset total higher, with ILS and reinsurance fund activity also said to have been buoyant during the final quarter of the year.

The two fastest growing investment fund segments in Bermuda, in terms of the number of funds based there, so private funds and professional closed funds, count many run by insurance-linked securities (ILS) and reinsurance fund managers, with names including AlphaCat Managers, Aspen, AXA XL, Elementum Advisors, HSCM Bermuda, Nephila Capital, Pillar Capital Management, Hiscox ILS, and RenaissanceRe among the ILS or reinsurance focused strategies registered under that category.