Florida State Board allocated $398m to ILS for 1/1, across Aeolus, Pillar, RenRe

The Florida State Board of Administration, which manages the states massive roughly $180 billion Florida Retirement System Pension Plan, has allocated $398 million to reinsurance and retrocession opportunities across three ILS managers in time for the January renewals.

The Florida State Board of Administration was already allocated to insurance-linked securities (ILS), for the Florida Retirement System Pension Plan, with around $950 million invested in the market as of the middle of 2023.

But, as we reported around that time, the target was to increase the allocation to around the 1% of assets level, which would imply a significant scaling-up of its ILS and reinsurance investments.

Which it now transpires has begun, with new allocations to existing ILS manager relationships at the end of 2023, in time for the January 2024 reinsurance renewals.

The Florida State Board of Administration had been told that the reinsurance market is deemed hard and that this might be the time to expand on its investments in ILS, which are largely reinsurance and retrocession focused.

In a new manager report, it’s clear the investor has added $398 million to its ILS allocations, so taking them presumably to somewhere around the $1.35 billion level, depending on the asset value of each allocation prior to these new investments.

Given the way returns rose in 2023, it’s possible it will be higher than that, at this stage, making the State Board a significant investor in the ILS market.

The new ILS allocations have been made to managers the investor already had a relationship with, Aeolus Capital Management, Pillar Capital Management, and RenaissanceRe.

The allocations were, $123 million to Aeolus’ Property Catastrophe Keystone Fund, $200 million to Pillar’s Juniperus Opportunity Fund and $75 million to Renaissance Re’s Tintoretto Reinsurance Partners LP, according to the document seen by Artemis.

All of these ILS manager’s have reported raising new funds around the end of 2023 for deployment into the 2024 renewals.

These are the first fresh ILS allocations that the Florida State Board of Administration has made since increasing its allocation target for ILS and reinsurance.

At a recent board meeting, it was commented that, “Insurance premiums have been very high and the market is very hard. We’re having dialogue with our managers right now to determine whether we want to upsize our exposure going into January 1 renewals.”

Clearly that decision was made and the investor decided to upsize on three of its core ILS manager relationship allocations as a result.

We estimate the new allocations may only take the pension fund to around a 0.75% ILS allocation, which suggests there is more room to grow to get nearer to the 1% allocation target.

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