Securis Investment Partners (Securis), a leading investment manager of insurance risk-related assets, including insurance-linked securities (ILS), today announces the launch of the Securis Catastrophe Bond Fund (the “Fund”), a sub-fund of Northill Global Funds ICAV.
The Fund will target a net return of USD Libor + 4-5% with low correlation to more traditional asset classes, and enables investors to participate directly in pure catastrophe event risk via the first UCITS-compliant fund to be managed by Securis, one of the longest-established specialist independent investors in ILS.
The Fund invests in a portfolio of catastrophe (cat) bonds, which are tradable insurance risk-related securities. The Fund’s investments are diversified across a range of securities which are exposedto catastrophe event risk in different geographies.
Cat bonds are risk-related securities that provide risk transfer protection to issuers, typically in the event of a natural disaster, such as a hurricane or earthquake. The underlying bonds transfer specific risks from reinsurers to investors and offer competitive yields relative to similarly rated financial market securities. The securities are subject to a loss of principal on the occurrence of a pre-specified catastrophe event, thus the absence of such a disaster during the term of the bond drives its returns.
The performance of cat bonds is generally not impacted by financial market events. A stock market gyration or interest rate movement does not make a natural disaster more or less likely to occur, and there is little evidence that past natural catastrophes have negatively affected financial markets. This unique characteristic of cat bonds brings valuable risk diversification benefits to a broader investment portfolio, and provides a compelling source of uncorrelated returns.
Securis has a long track record as one of the leading ILS managers and can demonstrate a successful 10 year track record of investing in cat bonds and delivering positive returns. The firm has a team of 43 skilled professionals with depth of expertise in origination and analytics and in selecting and managing insurance risk-related portfolios for its clients.
The Fund is focused on providing long-term value to investors and will charge an annual management fee aligned to the returns and liquidity available in the current market, and no performance fee.
Continued growth of ILS is expected as the reinsurance market continues to expand into new lines of business. Growing catastrophe risks, driven by increasing coastal urbanisation and more volatile climate trends mean reinsurance capital shortfalls continue to widen. The largest peak perils such as US hurricane and earthquake will continue to drive the ILS market, however, new perils such as terrorism, cyber risk and flood are emerging which will serve to augment growth in the ILS market.
Regulatory changes, such as Solvency II, also present an opportunity for the sector as insurers and other buyers of reinsurance options make greater use of the capital markets to meet their risk requirements.
Rob Procter, Chief Executive Officer, Securis Investment Partners LLP, said:
“Cat bonds have continued to achieve uncorrelated returns, demonstrating their resilience to financial market factors. The low yield environment and recent unstable market conditions for traditional assets have shown that cat bonds bring valuable risk diversification benefits to a broader investment portfolio. The asset class continues to offer long-term investors a compelling source of diversifying returns compared to many other investments.
“We believe the cat bond market has reached a state of maturity which makes this an opportune and exciting time for Securis to bring its first UCITS-compliant fund to market. So doing enables us to make best use of our strong cat bond market presence and leverage our existing analytical and portfolio construction capabilities, whilst broadening our investor base.
“As the supply of collateralised protection via cat bonds continues to prove attractive to both existing and new buyers of reinsurance protection, the application of ILS is widening as a risk transfer solution for issuers and investors alike. We believe that ILS will continue to favourably compensate investors for the risks they take on.”