Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Risks, returns and volatility of insurance and reinsurance linked investments


The options available to investors seeking to access non-correlated returns by investing in insurance and reinsurance linked asset classes which are correlated to catastrophe events and not to the wider financial markets are growing. As different types of reinsurance vehicles emerge and new ways to structure and trigger insurance-linked securities and catastrophe bonds are found, the range of investment opportunities grows. But how risky are they, how much return is possible and how volatile can they be?

Thankfully the nice people at broker dealer Lane Financial LLC have published a paper which looks at exactly this. The paper titled ‘Exploring the Isles ILS‘ looks at the different investment opportunities out there that give investors exposure to catastrophe and re/insurance linked assets and plots them all on an easy to visualise graph along with commentary. The paper references ‘Isles’ as Lane Financial take a novel approach of comparing the different strategies and assets as different islands in an ocean of alternative investments, a really nice way to look at this topic.

The paper discusses the relative return, risk and volatility for each type of re/insurance linked asset and covers strategies from reinsurance equities, sidecars, retro, ILW’s, catastrophe bonds of varying types down to mortality linked ILS. They also look at the ease of entry for investors and also the method of exit.

It’s a great read so head on over to the Lane Financial website, sign up and download ‘Exploring the Isles ILS‘. You can see a smaller version of their excellent graph below.

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The ILS Isles according to Lane Financial

The ILS Isles according to Lane Financial

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