Elementum sees investor interest across ILS spectrum, gets 3 new mandates in Q1

Elementum Advisors, LLC, the insurance and reinsurance linked asset manager, is seeing investor interest across the insurance-linked securities (ILS) instrument spectrum and has won three new mandates in the first-quarter of 2023, White Mountains CEO Manning Rountree said recently.

In a positive sign for the broader insurance-linked securities (ILS) asset class, Rountree said that interest is not constrained to just catastrophe bonds, rather Elementum is also experiencing investor interest and appetite for collateralized reinsurance investments as well.

Speaking about the ILS market in general, Rountree notes some of the challenges of recent years, saying, “The ILS market had a tough year and the same was true for Elementum, in 2022. The main event was really hurricane Ian, which turned the funds from from profits to losses in the course of one weekend in November.”

“The key metrics for elementals business are AUM, net revenues and EBITDA and all of those metrics were down in 2022,” he added, but positively for his firm White Mountains, which owns a key stake in Elementum, Rountree also said that, “the business does remain a positive cash-flowing business that produced dividends for us last year.”

“2023 is off to a solid start, and there’s some some interesting developments,” Rountree continued.

“The first is that the conditions for ILS investing are strongly favourable. The second is that Elementum has had some noteworthy fundraising success here in the first-quarter, landing through three new mandates of meaningful size,” he added.

We reported recently that Elementum has raised an additional $150 million in capital from investors for deployment into higher-risk ILS funds at the recent reinsurance renewals.

That $150 million was allocated by two investors, we understand, so it’s not clear whether the three mandates in Q1 were additional, or whether there was some overlap. But the overall learning is that investor allocations are coming and ILS managers are benefiting from them in 2023.

White Mountains CEO Rountree continued to explain, “A couple of observations on those those new mandates. The first is, the appetite we’re seeing from institutional investors is bar-belled. Folks either want a low risk, low return, highly liquid cat bond only product. Or at the other end of the spectrum, they want a high risk, high return, illiquid CRI strategy.

“We’re seeing inbound interest for both.”

Again, a very positive statement for the broader ILS market, as interest in the asset classes less liquid products continues to recover.

Finally, Rountree noted that investor interest is not always from the same segments of institutional investors that had been seen to deploy capital into ILS funds in recent years. Suggesting a broader cross-section of investors increasingly looking at the ILS sector.

“Second, the appetite is coming from different places than where the market has been in the last few years, most notably, hedge funds and endowments, who have really picked up their interest and are moving money into the asset class,” Rountree said.

John DeCaro, Founding Principal at Elementum Advisors, will join us in Singapore as a speaker at our ILS Asia 2023 conference. Register here.