ILS Ocean Fund launched by AUM Asset Management to invest into Barbados captive

Independent investment manager AUM Asset Management Ltd. has entered the insurance-linked securities (ILS) fund space, with its first offering being the ILS Ocean Fund, a strategy that invests into Barbados domiciled captive re/insurer, Ocean Re.

The ILS Ocean Fund, being structured with a Barbados captive as the underwriting vehicle sitting behind it, is the first of its kind in the jurisdiction, AUM Asset Management claims.

The structure has been modelled on Bermuda ILS funds, the company said, while the ILS Ocean Fund itself is a Cayman Islands exempted company incorporated with limited liability under the Companies Act on 4 January 2022.

AUM Asset Management explained, “The Fund is the first ILS fund with a Barbados captive, modeled after the well-known Bermuda captive approach typically used by ILS funds in the past, and has established a new precedent for future insurance funds with this unique regulatory structure.”

The ILS Ocean Fund will allocate its capital to insurance-linked securities (ILS) opportunities across geographies and insurance sectors, the company explained.

The ILS Ocean Fund strategy aims to achieve a “robust” return over money market investments, while exhibiting low correlation to financial markets.

Investing solely into dollar-denominated, insurance-linked securities, the ILS fund will target a return of 3% over the risk-free rate.

It will use special purpose vehicles (SPV’s) that are specifically set up and exclusively used to hold and manage the portfolios of risk it invests into.

Targeted ILS investments will be from across a wide range of insurance and reinsurance sectors, AUM Asset Management said.

These will include non-life, property, casualty, motor, marine cargo & hull, surety and other miscellaneous sectors.

The ILS Ocean Fund will adopt an underwriting strategy that mirrors the captive reinsurance company in which it is invested, Ocean International Reinsurance Co Ltd. (Ocean RE).

Ocean Re has historically been focused on business in Latin America, as well as captive business, but its business strategy has envisaged growth in writing open-market reinsurance as well, which this partnership with AUM Asset Management could support.

The ILS Ocean Fund will take a vertical cut of all lines of business written by Ocean Re, excluding any life insurance related risks, supported by actuarial models based on share capital of US $10 million, the announcement said.

AUM Asset Management provides investment services to institutional investor and family office clients from around the world, with around $200 million of assets under management according to its website.

This seems to be its first foray into insurance-linked securities (ILS) fund management and it’s interesting to see this partnership, with a reinsurance vehicle that could source some interesting and diversifying risk opportunities, as well as the location of the structure being in Barbados.

AUM Asset Management was launched in 2015 by Jean-François de Clermont-Tonnerre, who previously founded merger arbitrage specialist manager Abrax Amaerus.