Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Little growth at City National Rochdale ILW focused mutual fund


There has been little in the way of assets under management growth at the industry loss warranty (ILW) focused mutual insurance-linked securities (ILS) fund, the City National Rochdale Select Strategies Fund (CNRLX), in the latest quarter.

The City National Rochdale Select Strategies Fund, an interval structured mutual ILS and reinsurance linked assets fund run by Royal Bank of Canada subsidiary City National Rochdale, LLC, reported total net assets of $34.2 million as of January 31st 2018.

This figure was raised to $44.51 million, as of April 30th 2018, suggesting some new inflows, but the valuation of the net assets was only reported to be $30.015 million at the same time.

It’s assumed that some level of side-pocketing of at-risk ILW investments had affected the valuation of the fund assets, but now most of this appears to have been reconciled and the portfolio disclosure shows 10 triggered contracts, all across U.S. wind ILW positions, with a number in Texas, one in Florida, one aggregate or frequency cover, and one opportunistic contract.

These all appear to have been triggered by hurricanes Harvey or Irma it seems.

City National Rochdale has collaborated on its fund with specialist ILW and ILS investment manager Cartesian Iris, so the Select Strategies Fund allocates its capital to invest in the segregated cells of the Cartesian’s Iris Reinsurance Ltd. vehicle.

The investments are predominantly in industry loss warrants (ILW’s), an area that Cartesian Iris specialises in, with these derivative-like structures that provide reinsurance or retrocessional coverage making their payouts based on reported levels of industry loss from qualifying catastrophe events.

It appears that the fund is dealing with the 2017 loss events, with valuations of positions recovering in some cases, although no new investments have been made since the storms it seems.

Total net assets now stands at $45.576 million at July 31st 2018, so up by just over one million dollars on the end of the previous quarter.

We would expect this fund to realise its losses over the rest of this year, as the industry loss estimates become clearer, however some positions could remain impaired into 2019 if the final loss estimates for any of the hurricanes take longer to finalise than anticipated.

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