Nephilia Capital sees demand for insurance linked securities

Bermuda-based Nephila Capital, a leading investment manager specialising in insurance linked securities (ILS), attracted inflows of $340m from 11 UK institutions into its catastrophe reinsurance fund in the second half of 2009. The latest inflows bring total assets under management in the platform to $2.6bn.

Nephila has multiple investment products and managed accounts dedicated to investing in insurance-linked instruments such as catastrophe bonds. These are a form of insurance securitisation which spread the risk of insured claims from natural disasters. Because returns are based on physical events instead of market events, they offer investors access to an asset class which is uncorrelated to world stocks and bonds.

"Insurance-linked securities are clearly gaining broader acceptance from institutional investors and consultants," said Paul Dackombe, head of UK Institutional Sales at Man."After the recent financial market turmoil, institutional investors are actively seeking return streams that are independent from the capital markets and catastrophe reinsurance certainly provides that portfolio benefit."

Nephila is also active in traditional reinsurance markets, where the vast majority of hurricane and earthquake risk is written. In 2009, catastrophe premiums in reinsurance markets reached their highest level since 2006.

Co-founder Greg Hagood commented: "Insurance payouts for damages caused by hurricanes Gustav and Ike and the heavy investment losses and liquidity constraints brought about by the financial crisis have led to a major market shake out. Remaining participants, such as Nephila, have therefore been able to capitalise on this opportunity and charge higher catastrophe premiums."

Nephila has recently bolstered its senior management team with the appointment of two new partners, Steve Glassman and Adolfo Pena, who will help support the ongoing growth of the business. Glassman joined in February as a managing partner, after more than 20 years with Merrill Lynch. Adolfo Pena, a portfolio strategist and Seismic and Financial Engineer, has been promoted to Partner, having joined Nephila in 2005.

Nephila Capital Ltd is a leading investment manager specialising in the reinsurance industry with multiple investment products dedicated to investing in instruments such as insurance-linked securities, catastrophe bonds, insurance swaps, and weather derivatives. Founded in 1998, it is one of the largest participants in the insurance-linked securities market. In June 2008, Nephila sold a 25% stake in its management company to Man Group.