18 November 2022Reinsurance

AUM launches ILS Ocean Fund

AUM Asset Management, an independent investment management company that provides investment and fund solutions, asset management and advisory services to institutional investor and family office clients around the world, has launched its ILS Ocean Fund, a Cayman Islands exempted company incorporated with limited liability under the Companies Act on 4 January 2022.

The Fund invests in a globally diversified portfolio of dollar-denominated, insurance-linked securities (ILS) instruments in a diversified set of geographies and aims to achieve an attractive return over money-market investments (risk-free rate plus 3%), with low correlation to fluctuations in financial markets through special purpose vehicles that are set up specifically and exclusively to hold and manage such portfolios.

The ILS investments span a wide range of insurance sectors, including but not limited to non-life, property, casualty, motor, marine cargo & hull, surety and other miscellaneous sectors, which provide the Fund with opportunities that potentially may not be easily accessible by other investors.

The underwriting strategy for the fund will mirror that of the captive insurance company in which it is invested, Ocean International Reinsurance, and will take a vertical cut of all lines of business (excluding Life Business), supported by the actuarial models based on share capital of $10M. Ocean Re takes into account the complexity and process requirements of each potential captive program, as well as local market practices, legislation, acquisition costs, taxes, income and reinsurance costs, among other factors, to generate competitive offers for each client, seeking to create a "win/win" scenario in each business.

The company claimed that the fund is the first ILS fund with a Barbados captive, modelled 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.