Twelve Capital refines its ILS investment strategy

Twelve Capital has fundamentally reassessed its insurance linked securities (ILS) strategy, reviewing its product offering to focus on cat bonds and peak perils in private ILS.

Twelve Capital said it expects more strong growth in the cat bond sector, with the asset class having delivered good performance over recent years, despite a period with substantial natural cat losses. It currently has a UCITS fund with more than $600 million in assets, and provides bespoke mandates for large institutional investors.

The asset manager said it sees little additional value in further diversification within private ILS, and will therefore focus on peak perils, such as US hurricanes and California earthquakes, in this market.

It argued peak perils offer improved risk adjusted returns within ILS and are better modelled and understood than other risks in the industry. Currently, significant premium increases are being experienced within the sector.

Twelve Capital also said it will invest in its analytics capabilities, particularly in improved understanding of the impact of climate change on the development of tropical cyclones, in close collaboration with reask, an Australian nat cat modelling and risk analysis company. The two companies believe that developments in technology and computing power will significantly enhance their ability to model nat cat events.

Urs Ramseier, Twelve Capital’s chief executive and chief investment officer, said the revised ILS strategy is intended to enhance its position as a one-stop resource for insurance investment products for institutional clients.

“This reflects the firm’s aim to provide cutting edge investment solutions for the entire insurance balance sheet and is expected to further strengthen Twelve Capital’s position as a global market leader in ILS, particularly in cat bonds with a strong focus on ESG,” Ramseier said.