Twelve Capital + Securis – It’s complementary. Overlaps add to our strength: Urs Ramseier

It’s rare to find two asset management businesses that you can combine and not face friction, or loss of clients, but in the case of the merger of reinsurance and insurance-linked securities (ILS) investment managers Twelve Capital and Securis Investment Partners, the overlaps only add to the strength of the new entity, according to Urs Ramseier.

Speaking with Artemis following the announcement that Twelve Capital and Securis Investment Partners will merge, resulting in a significant founder-led ILS manager business with around $7.8 billion in assets, Twelve Capital founding partner and Executive Chairman Urs Ramseier explained that the fit between the businesses and their cultures is very strong.

First, we asked Ramseier about the rationale for the deal and why bringing the two independent ILS managers together in this transaction was seen as an attractive opportunity.

Ramseier explained, “There are a few reasons. One is that the critical mass needed to be in ILS as an independent manager is going up, in terms of costs and you need to have a global business. This is due to cost of distribution, compliance, systems, all these things.

“Another reason is that the two businesses are very complementary, there is almost no overlap and where there is overlap it only adds to the strengths of the combined business.”

Providing more detail, he continued to say, “We do not have client overlap, we do not have overlap in distribution. Securis is very strong on the private ILS side, we are strong on cat bonds.

“This is very rare, that you can combine two businesses without friction and without, let’s say, loss of assets or clients needing to reallocate and so on. So this is basically a very good match.”

Ramseier noted that there are also market related reasons that the timing was good to explore and enter into such a merger of equals.

“There’s another reason, in terms of where the market stands, you know, that rates are really attractive and spreads are attractive in cat bonds, but I think this is just the start of a broader consolidation in not only ILS, but everything which has to do with risk transfers,” Ramseier told Artemis.

“I always say our competition is not other ILS managers any more. Our competitors are the reinsurers with their sidecars and quota shares, which is a different business, or a different way to access insurance risks.”

“So basically, we’re building an offering which is alongside a sidecar or a quota share investment, for a large pension fund.”

“This is the cat bond offering, the cat bond portfolios and the mixed portfolios and also the private ILS and the collateralised reinsurance.”

As an independent asset manager, Ramseier also explained that having the distribution reach is a critical factor, for any business that wants to scale.

Given the way the ILS market and reinsurance has developed over the last few years, now is an opportune time to dramatically expand distribution reach and seek out new clients and greater scale.

“This is how I see it and given that we’re independent, that we’re not part of a larger asset manager, we have to build the distribution ourselves, a global distribution, and global means US as well, Europe and Australia,” Ramseier said. “Twelve does not have US distribution, Securis has a US distribution. So that’s very complementary. We’re very strong in Europe. We have a BaFin license and European passport for fund distribution and these things together make us much stronger than standalone.

“This is all behind the rationale of the transaction. It’s very beneficial from a commercial point of view.”

Ramseier also sees the culture behind the two firms, Twelve Capital and Securis, as complementary as well.

“I think it’s a very good fit, because both have been independent. So it’s not that we buy something from an asset manager or reinsurance company. We have both been founded by partners and it’s still a bit the same culture there,” he explained.

“We kind of have the same source, roots and starting point, with the same approach and the same view on the ILS business. It is an independent manager, and entrepreneurial driven approach. From that point of view, I think it’s a very rare and good fit.”

Bringing the two ILS and reinsurance focused investment managers together results in an entity with almost $8 billion in assets. That greater scale is important, Ramseier believes, especially when it comes to being able to provide reinsurance and retrocession lines to source investment opportunities for private ILS fund strategies.

“The scale is very important on the transactional level, especially in private ILS. So if you do a $50 million transaction, the cost is the same as for a $5 million one,” Ramseier said. “So scale is vital.”

He added that, “We can combine sourcing and analytics on the private ILS side and then on the cat bond side, Securis has a cat bond fund, which obviously we will also distribute going forward, alongside our cat bond fund.”

Ramseier added, “We will keep the cat bond fund, the Securis Cat Bond Fund. It’s a UCITS fund, we will run two separate strategies and do some differentiation in terms of the offerings.”

He went on to highlight technology and the importance of an ILS management business having modern systems and processes.

“Securis has invested a lot in technology and systems in the past, which are state of the art and we can use. Securis is also strong on the analytics side, a thought leader on topics like climate change, all these things which obviously will be very beneficial to the combined group,” Ramseier told Artemis.