French reinsurer SCOR has now launched and begun marketing the insurance-linked securities fund which they first hinted at nearly a year ago, according to an investor presentation (PDF) which discusses the progress they are making with their ‘Strong Momentum’ strategic three year plan.
The fund launched in August according to the presentation and marketing of it begins this month. SCOR themselves have sponsored the fund with an initial commitment of $100m, we assume their aiming to encourage inflows from other investment sources to grow that significantly. This commitment and ambition could see SCOR quickly gain a large foothold in the insurance-linked securities investment space.
The fund will be targeting a return of Libor +7%, quite ambitious some might think having seen the returns achieved this year, but actually in a normal year (without major events and losses) an ILS fund should be able to achieve that.
They’re seeking to create a well diversified portfolio using type of peril, geography, tenure or term of bond, first/second event, rating and expected loss as measurements to achieve a well diversified investment fund. They intend to proactively construct the portfolio by actively sourcing deals. We wonder whether this could spur SCOR to issue more ILS or catastrophe bonds of their own in order to help achieve their ideal portfolio mix?
The fund will invest in catastrophe bonds, industry loss warranties (ILW’s), collateralized insurance swaps and collateralized reinsurance. We assume they will be investing in life as well as catastrophe linked instruments given SCOR’s previous interest and own exposures in that area, but we can’t confirm that.
They intend to utilise third-party risk models for analysis of the portfolio and risk management quantitatively, and leverage SCOR’s internal skills of underwriting, pricing and risk management to ensure a qualitative approach as well.
It’s a good time for SCOR to enter the ILS fund management market but with all these new funds (there are others launching this quarter) issuance is going to have to pick up soon to meet this new demand.