Aon hires Gallant as COO for Marilla Investment Management. Capital raised?

Broking giant Aon has hired Teresa Gallant from Canopius to become the Chief Operating Officer for its Marilla Investment Management Ltd. entity that offers reinsurers and investors a route to access returns from a globally diversified book of reinsurance. It also appears some capital may have been raised for a Marilla private fund this year.

Marilla Investment Management was launched a few years ago and at the time we were told Aon saw it as a way to leverage its industry-leading distribution network to create a unique single point of access to a globally diversified reinsurance book.

While Marilla was said to be backed by reinsurers to begin, the goal was always to expand it out to become a key route for alternative capital and institutional investors to access reinsurance-linked returns.

With Aon pitching the product to investors as a unique opportunity, unlike any others in the reinsurance or insurance-linked securities (ILS) industry given the brokers broad, global access to risk and worldwide portfolio.

Now, Teresa Gallant, a well-known Bermuda based senior executive with broad operational leadership experience in reinsurance and ILS has taken on the Chief Operating Officer (COO) role at Marilla Investment Management Ltd., joining the Aon entity this month, she stated in a LinkedIn update.

Most recently, Gallant was the CFO, COO and Head of ILS for Canopius in Bermuda, and she had worked at that company since 2018, before going on a career break in late 2023.

Prior to that, Gallant was the COO at ILS Capital Management for almost two years, prior to which she worked at Prime Management as a senior account manager focused on hedge funds and ILS funds. She has also worked at Deloitte and EY in her career.

Gallant’s broad experience will be instrumental as Aon looks to build out the Marilla offering, which had a slow start but now seems to be picking up some pace.

We first wrote about Marilla’s set up in 2021, when a collateralized reinsurance vehicle named Marilla Reinsurance Ltd. (Marilla Re) was established in Bermuda.

At that time, Marilla was being explained as a new global catastrophe reinsurance facility, with backing from Swiss Re, PartnerRe and also AIG owned (at the time) Validus.

However, it was also known the ambition was to use Marilla as a way to provide investors with access to portfolios of Aon’s reinsurance book, an efficient way to bring more capital in to service the broker’s clients, in a similar way to the Client Treaty and other initiatives.

The idea was that Marilla would take an automatic up to 5% line on global catastrophe excess-of-loss reinsurance program renewals that Aon brokered.

When it was pitched to ILS funds and institutional investors, Marilla was described as a global index, or beta-like, access to property catastrophe reinsurance market returns. The idea was for capital to be automatically allocated to a range of reinsurance structures, on programs where Aon clients had agreed to its participation, where Marilla will follow lead terms and allocate evenly across program tower layers, we had written at the time.

Aon renamed its Bermuda based investment advisor entity Aon Hewitt (Bermuda) Ltd. to become Marilla Investment Management Ltd., which is where Gallant has now landed as COO.

While Marilla was designed to allow investors to allocate and source returns from across Aon’s global catastrophe reinsurance book, we understand that internally it has also been seen as a vehicle for providing investors access to more defined and specialised areas of insurance, including cyber.

As we understand it, as of earlier in 2024, Marilla offered just one segregated account, under Marilla Capital Ltd., with account Marilla Capital-1 operating as a private fund and having almost $50.2 million in assets earlier this year in Q1 (we don’t know if that’s third-party capital at this time, or not).

There had always been talk of a fund, the Marilla Global Reinsurance Market Fund, but it’s unclear how significant this is, or whether it has meaningful investor capital, or perhaps could just be another name for this segregated account.

Artemis has also learned that there is an ICAV structure named Marilla Capital (EU) located in Ireland as well. So it does seem Aon is continuing to build-out Marilla and there could be more third-party capital involved by now.

We understand that, like most raising capital for private reinsurance focused ILS strategies, Aon has not found raising third-party capital as easy as it likely envisaged with Marilla. Timing was not as kind as it could have been, with Marilla launched around the time ILS funds focused on collateralized reinsurance took some significant losses.

Investor sentiment for private ILS and collateralized reinsurance was dented and it seems this affected Aon’s Marilla plans as much as it affected the broader ILS market.

Some evidence of this may be seen in the fact segregated account Marilla Capital-1 was previously named Marilla Capital-2021-1, but no funds were raised for it until late 2023 or early 2024, we understand.

As said, Marilla Capital-1 had over $50 million in assets as of the first-quarter of this year.

With ILS market conditions dramatically improved now over 2020/2021 when Aon originally began marketing Marilla, it seems the broking group is now making more headway and perhaps beginning to introduce third-party capital to the strategy.

As we said in previous articles on Marilla, this really could be a unique proposition for investors, given Aon’s distribution reach and ability to originate risk from across the globe, while the fixed allocations and terms mean it will be appealing to cedents as well as a source of efficient reinsurance capital.

Finally, as had also previously said, Marilla is just the latest example of Aon blurring lines between the roles of broking and underwriting capital provider, something it has done a number of times with initiatives over the years.

While some may see that as potentially disruptive for the market, there is also a lot that might suggest it could be positive.

The broker has perhaps the most robust view of market activity, data and pricing at any point in the chain. So Aon can efficiently construct portfolios to the benefit of its ceding clients and the reinsurers or investors backing Marilla, meaning it can deliver benefits to both sides of the trade.

While, of course, also controlling more of the flow of risk to capital and extracting its share of the economics as well.

The question is, does that enhance market, execution and pricing efficiency for the cedents clients, reinsurers and investors? Or is Aon the real winner when it operationalises and scales a strategy like this?