Introduction to Investing in Insurance Funds

This guide is designed to help investment committees, portfolio managers, and risk teams understand how ILS can enhance diversification, the underlying risks and instruments to which they are gaining exposure from catastrophe (‘cat’) bonds to collateralised reinsurance, and the operational and valuation nuances that set the asset class apart. Developed by the SBAI’s ILS Working Group of leading ILS managers and institutional investors.

What the guide covers:

• Why ILS matters: low correlation to traditional markets and structural risk premiums in “peak perils”
• Access routes: cat bonds, ILWs, sidecars, and collateralised reinsurance – direct vs. fund structures
• Liquidity & valuation: secondary-market realities, post-event collateral / side pockets, and mark-to-model NAVs
• Manager due diligence: sourcing, underwriting, modelling, and climate / secondary-peril views, and conflicts
• Operating terms: triggers, legal / tax / regulation, fee alignment, and reporting template