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There has been a lot of discussion lately about whether pension funds would be among the first investors to lose their attraction to the current market environment of lower reinsurance and catastrophe bond pricing by turning heel and exiting the sector.
However the opposite appears to be largely true, with some pension fund investors keen to increase their allocations to the space, when market conditions allow, while still more want to enter the sector (as evidenced by new mandates) and others continue to do their research into insurance and reinsurance linked investments.
There have been a number of cases in recent weeks of pension funds which have been invested in insurance-linked securities (ILS) for a number of years pulling back as a reaction to the lower pricing environment. For some investors, who entered the ILS asset class purely due to the returns of the last few years, the decline in pricing makes the sector less attractive. This is an expected consequence of the lower price environment, but not all pension funds are the same or have the same motivations.