Twelve Capital shifts ILS strategy to focus on cat bonds, peak perils

Twelve Capital, an investment firm specialising in insurance investments, has reassessed its insurance linked securities (ILS) strategy, reviewing its product offering to focus on catastrophe bonds and peak perils in private ILS.

The company said it expects "strong growth" in the cat bond sector as the asset class delivered good performance over recent years, despite a period with substantial natural cat losses in relation to COVID-19 and business interruption.

Twelve Capital currently has a UCITS fund exceeding $600 million in assets, and providing bespoke mandates for large institutional investors.

The asset manager sees "little additional value" in further diversification within private ILS, and will therefore concentrate on peak perils, such as US hurricanes and California earthquakes. It believes that peak perils in private ILS 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.

Furthermore, Twelve Capital 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 companies believe that developments in technology and computing power will enhance the ILS investment processes.

Urs Ramseier, chief executive and chief investment officer of Twelve Capital, said: “With Twelve Capital’s revised ILS strategy, the Group aims to further enhance its position as a one-stop resource for insurance investment solutions 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.”