Sector developments and company hires

Motor insurer preps ILS strategy
UK specialist motor insurer ERS Group is set to launch an integrated ILS offering as part of its plans to progress its commercial expansion. Three complementary investment strategies will be offered: an open-ended mandate with a remit to invest across both public, private and non-life ILS, with semi-annual liquidity; a closed-ended, higher risk and higher target return fund; and a liquid catastrophe bond fund.

The offering will be set up and managed by new hires Neil Strong as ceo ILS and Fergus Reynolds as chief underwriting officer ILS, supported by Sandro Kriesch. Strong and Reynolds were previously partners at Securis Investment Partners, based in London, and Kriesch was a founding partner at Twelve Capital in Zurich.

In other news…

GLM II launched
GoldenTree Asset Management has closed US$725m in commitments on a second CLO strategy, dubbed GLM II, under its GoldenTree Loan Management programme. The firm previously raised US$600m for the first vintage of the strategy (SCI 11 January 2017).  

Over 60% of investors in GLM II are returning investors from this first vintage. Many of GLM II's investors increased the size of their commitment relative to the previous vintage, given the attractive return profile.

The aim of the GLM programme is to capture GoldenTree's top decile track record in CLO equity and further enhance returns, given its unique approach to CLO execution. The vehicle's structure enables GLM to take on additional responsibilities that simplifies the role of banks, leveraging their core competencies and driving significant efficiencies in the execution of CLOs.

In addition, GLM CLOs are intended to comply with European risk retention regulations, enabling participation by the broadest universe of investors. The investor base is further diversified by type, with participation from sovereign wealth funds, corporate and public pension funds, insurance companies, foundations and family offices.

GoldenTree's approach has provided an average net IRR in the mid-teens since inception of the GLM programme, as of 31 December. Furthermore, the GLM programme has made distributions of over 15% per annum and has never missed a BSL CLO equity distribution. 

Record cat bond issuance posted
Aon Securities 4Q20 ILS Update notes that US$11bn of property catastrophe bond limit was placed last year, the highest total on record, versus US$5.4bn placed in 2019. In addition, volume of US$3.7bn in 4Q20 was a record issuance quarter.

The total issuance for 2020 is made up of 46 property and casualty transactions completed by 36 sponsors with an average deal size of US$239m, versus 23 transactions completed by 21 sponsors in 2019, with an average deal size of US$234m. The total amount of property cat bonds outstanding is marginally up (by around 2%), compared to 2019 at US$29.5bn.

Last quarter, a total of 14 ILS transactions were issued, with 15 of the 22 classes upsized from their guidance and four new issuers entering the market. Most transactions priced at their mid-to-tight ends of guidance and featured per occurrence rather than aggregate triggers.

Aon expects the busy ILS pipeline to continue in Q1 and Q2, given expected maturities of approximately US$2bn and US$4.3bn respectively.