More Australian pensions deploy to ILS. Rest Super picks Twelve for cat bonds

More Australian pension super funds have begun allocating to insurance-linked securities (ILS), according to Bloomberg, as the publisher names Rest Super and Host Plus as allocating to the space. Artemis has learned that Rest Super has invested with manager Twelve Capital for catastrophe bonds.

Rest Super is a pension and retirement super fund with around A$80 billion in assets (US $54 billion) under management.

Bloomberg said that Reset Super has allocated A$200 million over the last two years into natural catastrophe exposed insurance-linked securities (ILS).

We’ve learned that Rest Super has an allocation to a fund strategy managed by Zurich-headquartered specialist Twelve Capital, with this focused on accessing returns from the catastrophe bond market.

Another Australian super fund, Hostplus, an institution with a huge A$115 billion in funds under management, is also reported to have invested into the ILS market earlier this year as well.

In the case of Hostplus, the investment is to collateralised reinsurance quota share arrangements, Bloomberg said.

Marina Pasika, Rest Super’s head of growth alternatives, told Bloomberg, “A couple of years ago, insurance companies could easily issue catastrophe bonds or other ILS instruments with fairly low attachment point. Those attachment points to deliver on those bonds have really gone up in the last year or two.”

That’s a factor that has helped to make ILS more attractive to Australian institutional investors again over the last year, resulting in growing interest and more allocations to the asset class from the country.

Hostplus’ Deputy Chief Investment Officer Con Michalakis had said earlier this year that the pension funds ILS investment has already “done very well”, given how the market’s supply-demand imbalance has helped to make reinsurance a more attractive asset class.

With Australian pensions seeing around $2 billion of inflows a week and growing fast, these institutional investors are seeking out more opportunities to deploy and diversify their huge asset bases.

Recently, it was also reported that Colonial First State, one of the largest Australian institutional investors, is looking to deploy some of its near US $100 billion of assets into the catastrophe bond market.

Thanks to the rekindled interest in catastrophe bonds and ILS in Australia, ILS managers have been benefiting from increased inflows from institutional investors there and these large allocators can look to deploy meaningful sums.

As large investors around the world search out relatively uncorrelated and diversified investment opportunities, catastrophe bonds and ILS, with their floating rate of return, are seen as increasingly attractive given their recent historical performance.

View details of major pension fund and sovereign wealth investors in ILS and reinsurance in our directory.