Alternative capital can “bypass” the traditional value chain: Aon

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For some year’s now we’ve been saying that insurance-linked securities (ILS) capacity and alternative reinsurance capital is destined to get closer to risk, as structures and technologies advance to allow it to break free from the strictures of the traditional market chain.

So, it’s encouraging to hear that insurance and reinsurance broking giant Aon agrees and feels that the efficiencies and increasingly direct approaches we associate with ILS capital today, are only the start of something much more impactful to come.

At its inception, ILS capacity was seen as an alternative source of peak risk capital, with the depth and liquidity of institutional investors able to absorb the truly enormous tail exposures that insurance and reinsurance market’s face.

Schroders takes majority stake in InsuResilience fund manager BlueOrchard

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Global asset management group Schroders is set to acquire a majority stake in impact and microfinance investment management specialist BlueOrchard, the firm that is also the manager of the InsuResilience fund.

Schroders said the move further accelerates its growth in the private assets arena and also in impact investing in emerging markets.

It comes shortly after Schroders announced that it is lifting its ownership stake in Swiss ILS & reinsurance investments specialist Secquaero Advisors AG to 100%, another piece of its private asset growth strategy.

Higher risk-free rate boosts ILS investment returns

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The steady rise in interest rates of instruments such as U.S. Treasuries, that are typically used as collateral for insurance-linked securities (ILS) and collateralized reinsurance investments, have now served to boost returns for ILS investors in 2019.

U.S. Treasuries have seen their interest rates rise steadily over the last two years, which supports better returns for ILS investors given the floating nature of ILS instruments such as catastrophe bonds and other reinsurance-linked assets.

U.S. Treasuries fell to as low as a 0.20% return back in 2016, but steady increases helped by U.S. interest rate rises mean that they currently stand at around 2.07% for a 90-day Treasury instrument.