ILS strategies are back in demand after years on the sideline – but the asset class can turn into a costly affair

Many global asset managers experience a renewed interest in insurance-linked securities (ILS) from their Nordic clients, since the asset class held its ground when stocks and bonds tumbled. However, some regional investors still disregard the asset class because of significant losses in 2017 and 2018.

This Thursday, Sept. 7, 2017. Satellite image made available by NOAA shows the eye of Hurricane Irma, left, just north of the island of Hispaniola, with Hurricane Jose, right, in the Atlantic Ocean. Six major hurricanes – with winds of at least 111 mph (178 kph) – spun around the Atlantic in 2017, including Harvey, Irma and Maria, which hit parts of the United States and the Caribbean. (NOAA via AP). | Photo: Uncredited/AP/Ritzau Scanpix/AP

In March, a great number of asset classes imploded and the stock-bond correlation briefly turned positive. This left investors with very few places to hide from the market crash. But insurance-linked securities (ILS) were one of the few asset classes that demonstrated resilience during the worst turmoil.

In 2020 in fact, the common benchmark for the asset class Eurekahedge ILS Advisers Index is up by 3.61 percent in USD terms – with no significant drawdown.

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