Bermuda domiciled insurance, reinsurance and ILS capital firm Validus Holdings, continues to see strong demand from investors to access its range of third-party capital products under the AlphaCat brand, according to Validus CFO Jeff Sangster.
Speaking during the re/insurers second-quarter earnings call recently Sangster said that the firm expects to see continued growth in assets under management at its insurance-linked securities (ILS) and sidecar focused AlphaCat division.
AlphaCat grew its total assets under management to $1.492 billion at the end of June 2014. Of this, $1.19 billion is third-party capital from investors, with $164.765m in the AlphaCat sidecars, $450m in the AlphaCat ILS funds and $575m in PacRe. The remaining $303m is Validus capital, as it continues to keep its stake in all of its third-party activities.
Sangster said that AlphaCat has grown its assets under management, largely the third-party contribution, by over $200m in the last year and that he anticipates seeing that rate of increase continue.
Sangster said that the interest in the ILS and third-party reinsurance capital space remains extremely strong. He said that there is probably, across the industry, more demand from investors than there is supply of business.
It’s not just the ILS side of the business seeing demand, according to Sangster. As well as the growth in the ILS market, which has driven investor interest, there is also the hedge fund reinsurer concept which is also beginning to generate a lot of interest.
AlphaCat remains a business unit which Validus expects to continue to grow, in order to capitalise on the interest from investors as well as to diversify its own sources of underwriting capital. AlphaCat contributed $13.1m to Validus’ net income, net of non controlling interest, while Validus also took a $4.3m share of managers fees.
As the AlphaCat unit grows its assets Validus will increasingly benefit from an attractive addition to its income. As a result it’s expected to continue to be a core focus for the re/insurer.