July 6, 2018

Investors: hybrid approach to employing ILS managers could take off

Two leading institutional investors in ILS said a hybrid approach to allocating to the sector, split between in-house and external management, could become more common now the asset class is more mainstream, according to comments reported in the latest ClearPath ILS report.

Ontario Teachers’ Pension Plan ILS portfolio director Philippe Trahan noted that this was the approach it has taken to the sector, with cat bond investments handled in-house with some specialists such as RenaissanceRe/DaVinci Re employed.

But investors weighing up whether to develop in-house expertise would need to bear the asset class’s lack of scalability in mind, he said.

“It is a trade-off for investors in how much they want to internalise considering their own time, resources and constraint on efforts.”

Eveline Takken, PGGM’s investment director for credit and insurance-linked investments, said that she could envisage investors taking a split approach in the future, managing simpler risks internally and employing a professional ILS manager to source more complex risks.

PGGM has recently started working with reinsurance companies, taking on reinsurance quota shares, she noted.

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