4 weeks ago
9
The New Zealand Superannuation Fund (NZ Super Fund), one of the government pension investment providers, has reported an impressive 12.6% return from its investments into natural catastrophe reinsurance through catastrophe bonds and other insurance-linked securities (ILS) in the last year of record.
The retirement plan investor counted US $828 million of nat cat ILS investments as of June 30th 2024, the majority of which (around US $472m) was allocated to catastrophe bonds held in segregated accounts of Artex’s Horseshoe Re II vehicle in Bermuda, we understand.
The NZ Super Fund counts two dedicated ILS investment managers among its external manager list, with allocations to Elementum Advisors since 2010, now standing at approximately US $480 million, and to Leadenhall Capital Partners, now standing at around US $347 million.
Both of the ILS manager allocations are up in size over the last year, with the value of the Elementum Advisors allocation up by 17% and the Leadenhall Capital Partners allocation up by 79%.
Which suggests that in the year to June 30th 2024, the NZ Super Fund increased its allocation to Leadenhall and possibly to Elementum as well, although there are returns to consider that will have boosted the value of each by somewhere around double-digits, we expect.
The cat bond allocation rose in value by almost 17% as well over the course of the last year.
While, the overall natural catastrophe reinsurance allocation, largely to cat bonds, rose in value by almost 38%, from US $602 million to the June 30th 2024 total of US $828 million.
But, that’s not all of the New Zealand Super Fund’s insurance-linked investment allocation.
For a number of years, NZ Super has also been allocating to an insurance run-off investment strategy managed by Carlyle and to life settlements via Apollo.
The run-off insurance investment increased in size during the last financial year, being around US $566 million at June 30th 2024.
However, the NZ Super Fund has elected to exit its life settlement investments with Apollo, saying it has terminated the opportunity as its own analysis shows the drivers of return for the opportunity diminished over time.
Life settlements are also seen as a niche asset class that would be challenging to scale as NZ Super continues to grow and so the pension has exited its agreements and the portfolio with Apollo will be wound down over the coming years.
As of June 30th, including the nat cat ILS, run-off and life settlements investments, NZ Super Fund’s insurance-linked allocation stood at US $1.63 billion in size, up from around US $1.37 billion a year earlier.
Lastly, while the return from the nat cat ILS investments of 12.6% over the last financial year of record was impressive for NZ Super Fund, more so was the NZ dollar value of that return, at NZ $128 million coming off a base value of the assets of NZ $989 million at the start of the period.
On the catastrophe bond portion alone, NZ Super Fund said it earned NZ $97.5 million in interest income in 2024, and NZ $63.6 million in 2023.
While the cat bond, ILS and other insurance-linked investments are a relatively small piece of the NZ Super Fund asset pile, they are providing valuable income and it is no surprise to see the investor allocating more to the nat cat reinsurance linked piece of the allocation, given the attractive returns being generated.
View our directory of pension funds and sovereign wealth funds investing in ILS and reinsurance.
English (US) ·