UCITS cat bond funds growing fast. Schroders overtakes GAM as largest

UCITS catastrophe bond funds as a group have increased their assets significantly over the last year, with accelerated growth of the cat bond market and rising interest in ILS investments helping to propel the UCITS cat bond funds we track to asset growth of roughly 58% in just one year.

Over that period, first place position for the largest UCITS cat bond fund has also changed, as Schroders has now overtaken GAM, after Schroders’ GAIA Cat Bond Fund overtook the GAM Star CAT Bond Fund (which is portfolio managed by Fermat Capital Management) in terms of assets held within the strategy.

At the end of May 2020, a group of 15 main UCITS cat bond funds had accumulated catastrophe bond assets of just over US $5.1 billion.

By the end of May 2021, just one year later, that figure had grown considerably, with the same 15 UCITS cat bond funds counting some US $8.05 billion of cat bond assets under their management.

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Franklin Templeton launches UCITS cat bond fund, managed by K2’s Malawer

Investment manager Franklin Templeton has launched a new UCITS catastrophe bond fund, which is portfolio managed by Jonathan Malawer from its hedge fund specialist manager arm K2 Advisors.

The Franklin K2 Cat Bond UCITS Fund is a Luxembourg based fund and part of the Franklin Templeton Alternatives Funds offering from the investment manager.

The new UCITS catastrophe bond fund will be widely marketed across Europe, being registered in eleven countries in total, including the UK, France, Germany and Italy.

The Franklin K2 Cat Bond UCITS Fund will be managed by K2 Advisors insurance-linked securities (ILS) and catastrophe bond lead Jonathan Malawer, Managing Director, Head of ILS, Commodities and Environmental Strategies.

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Franklin Templeton launches UCITS cat bond fund, managed by K2’s Malawer

Investment manager Franklin Templeton has launched a new UCITS catastrophe bond fund, which is portfolio managed by Jonathan Malawer from its hedge fund specialist manager arm K2 Advisors.

The Franklin K2 Cat Bond UCITS Fund is a Luxembourg based fund and part of the Franklin Templeton Alternatives Funds offering from the investment manager.

The new UCITS catastrophe bond fund will be widely marketed across Europe, being registered in eleven countries in total, including the UK, France, Germany and Italy.

The Franklin K2 Cat Bond UCITS Fund will be managed by K2 Advisors insurance-linked securities (ILS) and catastrophe bond lead Jonathan Malawer, Managing Director, Head of ILS, Commodities and Environmental Strategies.

FULL ORIGINAL PUBLICATION HERE

Cat bond activity may give multi-strategy funds room to expand

The acceleration of activity in the global catastrophe bond market over the last few months could now drive an opportunity for a number of multi-strategy investment funds to expand, as the availability of paper has increased even causing some investment managers to lift the shutters on closed funds, we understand.

Which could drive more capital to look at catastrophe bonds and perhaps other insurance-linked securities (ILS), or the more structured collateralised reinsurance opportunities such as sidecars.

Given a lot of the multi-strategy investment funds that look at cat bonds and other ILS are open to retail money as well, these investment managers would really like to see listed opportunities, or assets with greater liquidity, which could even drive interest among specialist ILS managers or reinsurance firms to revisit the listed fund strategy again.

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The only asset class that helps people rebuild after natural disasters

A core reason that insurance-linked securities (ILS), such as catastrophe bonds and other reinsurance linked investments, are considered as socially responsible investments by many allocators is the fact they deploy their capital into natural disaster recovery and rebuilding.

While ESG, environment, social and governance factors, are now seen as becoming critical for insurance-linked securities (ILS) strategies future popularity, the truth is that at least the S (social) aspect of ESG has been firmly embedded in the majority of ILS right from the start.

We first wrote about the importance of ESG for the catastrophe bond and broader ILS market back in 2009, when for the first time we learned of a pension fund citing ESG as an important criteria for its consideration of investing in a cat bond fund.

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Generali targets EUR200m Lion III Re “green cat bond”

Italian and global insurance giant Assicurazioni Generali S.p.A. is back in the catastrophe bond market with its fourth issuance, a EUR 200 million Lion III Re DAC cat bond through which it is seeking collateralized catastrophe reinsurance while adding “green” features to a cat bond issue.

It’s Assicurazioni Generali’s first cat bond issuance since 2017, it’s fourth in total, and marks a renewal of that also EUR 200 million Lion II Re DAC deal, although covering fewer perils as European flood coverage has been dropped for this new iteration of the Lion catastrophe bond.

It’s also the first cat bond from the insurer, in fact the first cat bond we’ve listed, to have a number of specific green credentials, as Generali looks to bring greater sustainability to cat bond issues, to make the resulting investment more ESG appropriate for investors.

FULL ORIGINAL PUBLICATION HERE

Tencent shows tech’s appetite to own access to reinsurance capital

Tencent Holdings Ltd., the Chinese multinational technology conglomerate, has provided one of the clearest examples of a tech giant wanting to own its access to reinsurance capital, a trend we’ve been anticipating would emerge.

Our regular readers know we have a passion for technology, alongside risk transfer and use of efficient capital, believing that the efficiencies of advanced tech can be combined with efficient access to reinsurance capital, in order to provide better, more responsive and ultimately cost-effective insurance products to consumers.

There have been a number of glimpses of this kind of development over the years, with most of the major technology giants of the world having some interest in insurance or reinsurance, or toying with how they themselves access risk capital.

Amazon, Google, Tesla, among others, as well as investors in tech like Softbank, have all been closely linked with initiatives to access reinsurance capital more efficiently, either for pure risk management purposes, or to enable the delivery of customised and better-priced insurance solutions.

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Collateralized reinsurance renewals firmer than cat bonds or ILW’s

While the catastrophe bond market has been first to experience investor-demand and capacity driven softening, as spreads have increasingly tightened on primary issues over recent months, this isn’t yet reading across to the entire collateralized reinsurance market at the mid-year renewal season, we’re told.

2021 has seen a significant upwell in demand from investors for new catastrophe bond investments, which has driven strong execution and keen pricing to the benefit of sponsors, but resulted in year-on-year softening in that market.

As we’ve been explaining over recent weeks, spread tightening in the catastrophe bond issuance market has now driven multiples to levels last seen in 2019.

This softening of cat bond rates has also spilled over into the industry-loss warranty (ILW) market as well.

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Catastrophe bond & related ILS set for record $10bn+ H1 in 2021

Issuance of new catastrophe bonds and other related insurance-linked securities (ILS) we track here at Artemis is now set to break new ground for the first-half of 2021, with more than $10 billion of issuance now anticipated, according to our latest data on the market.

The total issuance we’ve tracked so far this year that has already completed and settled, across property catastrophe bonds, other line-of-business cat bonds, private cat bonds and also mortgage insurance-linked securities (ILS), has already reached more than $9 billion.

Almost $5.6 billion of the total issued so far and tracked by us at Artemis represents pure Rule 144A property catastrophe bonds.

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Credit Suisse: Cushioning the impact of climate change with cat bonds.

More powerful hurricanes and increasing numbers of earthquakes – climate change is real. What does climate change mean for the alignment of investment portfolios? Investments in cat bonds offer institutional investors interesting opportunities to help shape the future.

Climate change is jeopardizing the creditworthiness of government bonds

“Over the past three decades, there has not been a single year when the average temperature in Switzerland was less than the average,” says Prof. David N. Bresch, Professor for Weather and Climate Risks at the Swiss Federal Institute of Technology Zurich, at Credit Suisse’s EAM thought leadership event. He is drawing attention here to ongoing climate change and the fact that the greenhouse effect needs to be limited to a considerable extent if the goal of the Paris Agreement on climate change to restrict global warming to well below two degrees by 2050 is to be achieved.

Because every degree of temperature rise leads to a 7% increase in humidity. As a result, there is a greater probability of tropical cyclones and hurricanes. An increased probability of natural disasters can in turn impact the creditworthiness of government bonds if national budgets face the additional burden of major loss events. “Countries in exposed regions must practice good risk management in order to secure their creditworthiness in the long term,” says Prof. Bresch.

FULL ORIGINAL PUBLICATION HERE