The Kiskadee ILS funds, operated by Hiscox Group’s third-party reinsurance capital and insurance-linked securities unit Kiskadee Investment Managers, took advantage of diversification opportunities at the April renewals to grow its portfolios to over 300 positions.
The fronting arrangement with Hiscox enables the Kiskadee funds to construct portfolios with a large number of discrete layers and programmes. Despite the overall volumes of risk traded at the April renewals being lower, Kiskadee Investment Managers found plenty of opportunities to access reinsurance risk and increase its diversification, taking over 70 new positions at the renewal.
The Kiskadee fund structure creates efficiencies which allow the adding of positions to the funds at diversifying renewal dates such as April to be achieved without the need for additional capital.
The new layers and programmes added at the April renewals consisted of many risks exposed to Japanese wind or earthquake exposures, two of the main catastrophe reinsurance perils available at this renewal. These covers are typically purchased separately by Japanese cedents, which makes them a prime target for ILS funds seeking to diversify further away from U.S. wind and quake.
Although this market holds great appeal for ILS participants, gaining access to the Japanese reinsurance risk is challenging. Japanese buyers continue to slowly adopt collateralized covers, but there remains some wariness of directly transacting with ILS capital in a collateralized manner. Further, like many other parts of the market, handling reinstatement limits is a challenge for market-facing collateralised ILS funds.
Kiskadee benefits from its relationship with Hiscox Re, the Bermuda based reinsurance division of the Hiscox Group, allowing it to gain good access to renewals with Japanese cedents in April and handle reinstatements in an efficient manner.
Between the two Kiskadee ILS funds over 300 individual positions are held, providing broad diversification. With north of $400m of capital under management the depth of reinsurance deals invested into is impressive.
Kiskadee benefits from the ability to leverage Hiscox Re as a fronting partner in order to access a much wider range of cedents and deals, while Hiscox Re benefits from additional capacity sourced from the ILS funds, helping it to bulk up line sizes, becoming more meaningful to capacity buyers and underwrite a greater volume of risk overall.