We invest in performance by nature. Our solutions provide access to a rapidly developing asset class that offers exceptional diversification due to its low correlation to financial markets.
What we do
Insurance-linked strategies (ILS) are an alternative form of reinsurance used by insurance companies and reinsurers to transfer peak event risk to the capital markets and thus optimize their regulatory capital requirements.
Investors are interested in ILS in view of their attractive and stable returns and their low correlation to traditional asset classes such as bonds and stocks or even alternative investments.
This low correlation reflects the fact that returns on insurance-linked investments depend solely on the occurrence of extreme insurance events such as large earthquakes or hurricanes. Developments in financial markets have very little impact on the performance of this asset class, as the structure of ILS excludes factors such as credit or interest risk.
Tradable and non-tradable forms of ILS
Investors can access such investments in two forms:
- Catastrophe bonds (cat bonds) – Insurance-linked securities are syndicated placements. They are tradable and have an average term of three years.
- Collateralized reinsurance investments (CRI) – This is a form of traditional reinsurance for primary insurers and is structured as a financial investment. CRI transactions are non-tradable and have an average term of one year.
Our approach – why partner with us
Our team of ILS specialists develops solutions that allow investors to participate in this asset class and benefit from the exceptional diversification it offers, including:
- Diversification across geography – We address the industry’s bias toward US wind perils by additionally spreading the risk in our portfolios across Europe, Canada, Japan, Australia and New Zealand, and across cat bonds and CRI transactions.
- Diversification across perils – We diversify risk in our portfolios across different peril categories, such as hurricanes, typhoons, cyclones and earthquakes, as well as across different trigger types and default probabilities.
- Mitigation of tail risk – Our investors benefit from uncorrelated risk exposures across the full range of potential catastrophe risks, resulting in well-diversified portfolios that are optimized to mitigate tail risk.
- High level of transparency – Investors can choose between conservative, balanced or enhanced strategies.
All our investment products and solutions also exhibit a clearly specified risk budget, thus providing the highest level of transparency and ensuring that investors are exposed to the same level of risk over time.
Team – an average of 17 years of industry experience
With a track record spanning almost two decades, we are one of the most experienced teams in ILS. We benefit from the combined expertise of 25 professionals from within the reinsurance industry with an average of 17 years of experience.
Evolving catastrophe risk landscape
“Climate change and the associated evolving risk landscape are key aspects of our investment activities as an ILS manager. In line with LGT Capital Partners’ long-term commitment to ESG topics, we want our ILS funds to meet the criteria for 'sustainable investments' under the EU Taxonomy. Our investment allocations are focused on helping insurance companies to meet their increasing capital requirements in a changing risk environment, particularly in view of evolving climate perils. It is exciting to see how the increased demand for risk capital is driving growth in our industry while simultaneously being part of an asset class that can have a positive impact on climate action initiatives.”
State-of-the-art catastrophe risk modelling technology
“LGT Capital Partners is leveraging digital solutions to drive attractive risk selection. We also apply state-of-the-art catastrophe risk modelling technology for the in-depth analysis of individual investment positions to optimize our ILS portfolios. As a qualified actuary, I find it very motivating that the firm gives me access to the latest tools to supplement my analytical skills. And I find it exciting to put the catastrophe models to work. This also allows me to forecast storm tracks and to incorporate them into initial assessments of the potential impact of hurricane systems on our portfolios."
Stakeholder engagement across the insurance value chain
“By engaging with stakeholders at both ends of the insurance value chain, we gain valuable insights that help us to tailor our portfolios to market demand. I meet with primary insurers around the world to negotiate ILS transactions and work closely with our investor base to understand their core risk tolerances. I am really pleased to work for a company where we have such a strong alignment of interests with our investor base, as we are a principal investor in our own strategies.”