NZ Super Fund expands cat bond investments, doubles Elementum allocation

The New Zealand Superannuation Fund (NZ Super Fund), one of the government pension investment providers, has added to its insurance and reinsurance linked investments again in the last year, with a doubling of its allocation to investment manager Elementum Advisors, seemingly all in catastrophe bonds.

The New Zealand Superannuation Fund (NZ Super Fund) has been investing into a range of insurance and reinsurance linked assets for a number of years, with allocations to life settlements, an insurance run-off strategy, catastrophe bonds and collateralised reinsurance.

The cat bond and collateralised reinsurance investments are in two mandates with specialist insurance-linked securities (ILS) fund managers Elementum Advisors and Leadenhall Capital Partners.

The fund began allocating to ILS back in 2010, when it launched its first allocation to Elementum. The fund then allocated to Leadenhall for the first time in 2013.

In 2014 the NZ Super Fund added its first life settlements allocation, through Apollo Global Management, then adding a second life settlements allocation in 2017.

Finally, in 2020, the pension added an allocation to insurance run-off business through asset manager Carlyle and this investment is actually into run-off specialist reinsurer Fortitude Re.

So it’s clear the NZ Super Fund has a strong appetite for insurance-linked returns and as of the end of June 2021 the total value of all these positions was almost NZ $1.6 billion.

The life settlements positions amount to NZ $386 million at June 30th 2021, slightly down on the prior years NZ $422 million.

The Carlyle insurance run-off allocation was valued at NZ $437 million at June 30th, up from NZ $377 million a year earlier.

Meanwhile the investment in ILS fund manager Elementum Advisors has doubled, reaching NZ $444 million at the middle of this year, up from NZ $222 million at June 30th 2020 and NZ $237 million at December 31st, suggesting this fresh ILS investment allocation was made in 2021.

The Leadenhall Capital Partners allocation stood at NZ $332 million at the mid-point of 2021.

The increase in allocation to Elementum Advisors appears to have been largely into a catastrophe bond strategy, as the NZ Super Fund disclosed that the value of its cat bond related holdings rose from just under NZ $222 million at June 30th 2020 to reach NZ $438 million at the middle of 2021.

Thee life settlements investments make up 0.7% of the NZ Super Fund’s assets, the insurance run-off allocation is another 0.7%, the Elementum Advisors allocation 0.7% and the Leadenhall allocation 0.6%.

So in total, investments into insurance and reinsurance related assets made up 2.7% of the NZ Super Fund as at June 30th 2021.

So the NZ Super Fund’s appetite for catastrophe bond investments has clearly continued to increase over the last year, while its balanced-approach to investing across insurance and reinsurance sees it generating returns from P&C reinsurance through the ILS fund managers, life insurance and also P&C run-off business as well.

View details of many major pension funds and sovereign wealth investors in insurance-linked securities (ILS) here.