14 September 2016 Insurance

Lohmann to launch €2bn life ILS fund in 2017

Industry veteran Dirk Lohmann, the CEO and one of the founders of Secquaero, the fund manager now 50.1 percent-owned by asset manager Schroders, plans to form a fund dedicated to life insurance-linked securities (ILS) in 2017.

Lohmann believes demand for such a product is strong among investors and the fund could reach €2 billion ($2.2 billion) in size. “This is an ideal asset for pension funds seeking longer duration investments,” he said.

“They are faced with the problem of trying to match their assets and liabilities and they want long duration paper. Also, it is not correlated with cat business and the chance of losing all the principal is very remote. It is a natural fit for pension money but it could suit other types of investors as well.”

Lohmann acknowledges that the supply into the life ILS market is lumpy and explains that the fund would seek commitments from investors that would be drawn down only as and when supply was available.

But he expects more deals to emerge in this space and notes that some very big life financing transactions have happened in recent years, leading him to believe that supply will increase.

This new fund will complement the other funds managed by Secquaero including a European fund that invests in short tail risk including collateralised reinsurance and ILS but excluding life; its original pure ILS fund that comprises 20 percent life deals; a new US fund launched in December last year that mirrors its global ILS fund; and a cat bond fund it manages for Schroders.

Secquaero also has the mandate to invest in a mixture of collateralised reinsurance and other types of cat risk for a Swiss pension fund, launched late in 2015. Lohmann said its launch will be helped by changes made by the Swiss regulator that allow companies to invest in ILS as part of their regulated investment portfolios.

Lohmann also expressed great interest in the work being done by Vario Capital Partners, the venture which has been working on developing a ‘whole portfolio’ ILS product as a capital management tool for insurers.

He said Secquaero would be interested in looking at securitisation structures driven by Solvency II capital requirements and would be open to investing in deals structured by Vario, which told Monte Carlo Today earlier this week it was looking to start fund raising in 2017.

“We would be open to investing in those types of structures and we would not need a third party to model the risk, we could do that ourselves,” Lohmann said. “Vario will need to educate the sponsors of these but we would be happy to invest.”

Monte Carlo Today also asked Lohmann if he believed funds should standardise the way they report to investors, in an attempt to make the industry more transparent and easier to understand.

He agreed that there was room in the industry for standardisation but said he did not think a third party company such as a rating agency should play this role.

“Rating agencies do some good things but bringing their approach to funds would be too much,” he said.

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