Securis launches fourth vintage of life ILS funds with almost $300m of capital

Securis Investment Partners has launched the fourth vintage of its long-standing life insurance-linked securities (ILS) funds, with close to $300 million of capital backing this vintage.

The London-headquartered ILS focused asset manager has been offering life ILS fund investment opportunities for 17 years and Artemis spoke with the Securis Life team to learn more about their views on the prospects for life ILS in the current market environment.

Providing some background on the Securis Life ILS strategy, Andrea Cavalleri, CIO-Life explained, “Fundamentally, the Securis Life team focuses on transactions which are predominantly exposed to life insurance risks.”

“Our purpose, which we believe has been consistently delivered over market cycles in the last 17 years, is to generate uncorrelated returns to equity and debt markets for institutional investors.

“Our transaction structures vary widely in format, from fairly standard reinsurance to very structured, multi-jurisdictional agreements.”

Given the significant volatility in capital and investment markets over the last year, Securis’ life ILS strategy has delivered a valuable source of diversifying return, the team believes.

Adam Robinson, Head of Life and Chief Underwriting Officer, told us that, “The last twelve months have shown how biometric, health and lapse risks can deliver attractive risk adjusted returns and diversification to institutional asset allocation – for the twelve month period ending October 31st, 2022 the S&P 500 Total Return Index was down -14.6%, the Bloomberg US Corporate High Yield Index was down -11.8%.”

Artemis has learned that Securis’ life ILS funds have delivered positive 7.4% net returns to investors, on an asset-weighted basis, across that same period.

Securis adopts an opportunistic and solutions-driven approach to life insurance and reinsurance investing, seeing itself as a valuable capital source that can help to fund the expansion of quality companies in the space.

“We think that at the moment, wholesale and retail life insurance distribution is undergoing a consolidation phase where Securis is actively supporting acquisitive management teams keen on maintaining ownership,” Jerome Grenier, senior originator said. “Where owners and partners would have only private equity as a source of long-term capital in the past, our financing proposals have been well-received as a source of growth capital. Our role is to be at the forefront of a very specific sector – life insurance – and deliver capital solutions in size and speed. Our pipeline has been stronger than it has ever been.”

Vegard Nilsen, Chief Executive Officer explained, “Life insurance ILS, in our opinion, is ideally poised for growth in a higher interest rate environment, as projected life ILS return profiles remain stable on a spread basis. Interest rates are not the main driver of performance. For our counterparties however, other sources of funds are now more expensive. Securis is well-placed to provide flexible, competitive capital to our counterparties at attractive yields for our investors. The fifth vintage of the Securis life strategy is expected to launch during the first half of 2023.”

For several years now, it has been challenging to get investors excited about high single-digit returns in a closed-end, multi-year fund format.

But today, under the shadow of global macro-economic volatility and geopolitical stress, life ILS investments are beginning to turn more heads.

For those investors who classify ILS alongside other private market investments, the genuinely diversifying nature of an asset class delivering positive returns and with bond-like characteristics, makes life ILS an investment that can help offset some of the headwinds their broader portfolios face.

“Importantly, our investors are not seeking equity hedge fund returns – their allocations are already maximised in that space. They want monthly, quarterly or yearly cash flows which they can match to adverse market risk scenarios. As our financing is not in credit format but with sole recourse to life insurance risks, our intention is to continuously deliver uncorrelated returns to most market risks,” Andrea Cavalleri said.

Overall, Securis sees opportunity in the life insurance and reinsurance space, with growing demand set to require increasing levels of capacity, while third-party investors can be the ones to benefit by providing capital through specialist investment managers, such as itself.

“Securis is in constant discussions with life insurance supply chains in many geographies. We believe long-term requirements for supplemental retirement and healthcare funding will drive increased personal and workplace contributions to the sector. In a regulated space like life insurance, government policy is a key influencer of savings and protection purchasing behaviour. We are confident that as aging populations’ funding needs become more acute, the life insurance sector will grow and innovate to meet this demand,” Adam Robinson told Artemis.