08 Jun 2022

SBAI Publishes Guidance for Responsible Investment in ILS Funds

Today, the SBAI, an active alliance of institutional investors and alternative asset managers, published guidance on Responsible Investment in Insurance Linked Strategy Funds.

The SBAI and its Responsible Investment Working Group has previously published a Responsible Investment Policy Framework, and this new guidance forms part of an alternative investment strategy toolkit designed to supplement this framework. Additional guidance on Equity Long/Short, Credit, Macro and Systematic strategies can be found in the SBAI Responsible Investment Toolbox.

Dedicated RI approaches within ILS are in their infancy and often do not fit neatly into regulatory or industry-based reporting frameworks. As with many other alternative investment strategies, both the practicality and the effectiveness of RI integration and dedicated RI approaches can vary, and application of these strategies requires careful thought and discussions between asset managers and allocators.

Dominik Hagedorn, Chief Operating Officer at Tangency Capital, said: “This guidance on Responsible Investment for ILS funds is a great resource for both asset managers and institutional investors to understand the nuances of applying RI in these strategies. The memo helps formulate the decisions asset managers need to make and discussions allocators should be having with these managers.”

The SBAI Responsible Investment Working Group is a community of over 180 representatives from both institutional investors and asset managers that come together to aid the SBAI’s mission of improving industry outcomes. The guidance produced from this group is not prescriptive in how RI should be applied but focuses on process disclosures asset managers should make and questions that institutional investors should ask. The ILS sub-stream of this group will focus later this year on the questions that asset managers can ask of cedents and sponsors to understand their RI related policies.

Alaina Cubbon, Vice President Portfolio Management at Elementum (Bermuda) Limited, said: “The SBAI Responsible Investment Working Group is a great neutral space for both asset managers and institutional investors to discuss industry challenges and arrive at practical solutions. This memo is the result of this collaboration and will aid the ILS industry as focus on RI is increasing.”

The SBAI also runs a dedicated ILS Working Group comprised of over 50 representatives from both institutional investors and asset managers. The group has produced guidance on Valuation and Side Pockets in ILS Funds both of which are available in the ILS Toolbox.