LONDON (Reuters) – Nephila Capital, a fund manager that invests in natural catastrophe insurance, is to give a broad range of investors access to reinsurance-linked investments for the first time via the Lloyd’s of London insurance market.
A new Lloyd’s insurance syndicate, backed by Nephila and managed by Asta Managing Agency Ltd, will underwrite reinsurance contracts known as insurance-linked securities.
An Asta spokesman said on Tuesday this was the first time investors, such as hedge funds, pension funds and institutional investors, would be have access to these instruments via the Lloyd’s market.
Insurance-linked securities (ILS) are instruments that allow insurers to spread their risks among investors. The most common form is the “catastrophe bond” in which insurers offload some of their exposure to natural disasters.
Reinsurance, in traditional forms and in areas like insurance-linked securities, has become a focus for some hedge funds and pension funds. The sector can offer attractive returns even in tough economic times because it not correlated with broader financial markets.
Bermuda-based Nephila Capital has $8 billion in assets under management. Private equity company KKR & Co acquired a 24.9 percent stake in Nephila in January.
Nephila will underwrite the products for the new Lloyd’s syndicate, which will start with a capacity of 100 million pounds ($157.39 million).
Lloyd’s of London is a collection of about 80 competing insurance syndicates that sell insurance against natural catastrophes and other risks worldwide.