SBAI updates Insurance Open Protocol to enhance transparency in ILS fund reporting

The Standards Board for Alternative Investments (SBAI), working in consultation with participating ILS managers, investors and interested parties, has again updated its Insurance Open Protocol reporting template for insurance-linked securities (ILS) and reinsurance linked investment funds.

Last October, the SBAI and a working group of insurance-linked securities (ILS) market participants and investors released an update to the Open Protocol focused on ILS and reinsurance investing, with a goal to enhance the standardised reporting templates for ILS funds and other reinsurance-linked investment strategies.

The aim of that update was to provide reporting on ILS strategies that was better timed with the insurance cycle, while providing more granular information and further details related to stress testing.

The Insurance Open Protocol has existed since 2017 and been adopted by a number of players in the ILS manager community.

The aim of the standard is to provide a more uniform method for reporting on ILS fund strategy performance, while enhancing transparency on the ILS fund sector.

The IOP risk reporting template and manual is designed for ILS funds with a significant exposure to property catastrophe insurance risk, catering for the unique characteristics of property catastrophe exposure, including risk types, sources of leverage, stress tests results and side pocketing.

In general, across asset classes, the Open Protocol is currently used by funds representing over US$2tn in assets under management.

Working with the SBAI’s ILS Working Group, which features a number of the leading ILS fund managers and also some institutional investors, the SBAI has further updated the Insurance Open Protocol reporting template.

Commenting on the update that has been published, Michael Hamer, Partner and Senior Investment Analyst at Albourne Partners explained, “IOP’s risk reporting has been revised to capture more aspects of the risk of property catastrophe insurance funds. It will improve the ability of investors to compare information between funds and to create a portfolio view of multiple funds. It is worth noting that IOP has materially benefitted from the input of managers and others in the SBAI ILS Working Group.”

François Delattre, Head of Analytics at Tangency Capital added, “(Insurance) Open Protocol helps streamline the reporting process and enable better transparency. This ultimately fosters resilience and a more secure operational environment that strengthens confidence for our investors.”

Thomas Deinet, Executive Director at the SBAI also said, “Better risk disclosure is a priority for investors and regulators alike. As a standardised template, (Insurance) Open Protocol ensures consistency, comparability, and clarity across funds to enable transparency and facilitate effective risk management.”

The IOP is just one resource that the SBAI ILS Working Group has developed, alongside guidance on valuation and side pocketing practices in insurance-linked funds as well as responsible investment guidance specific to ILS funds.

You can view the updated IOP manual and risk reporting templates over on the SBAI website.