CAT BONDS

CAT Bonds are being issued to guarantee the sponsor a protection from insured natural catastrophes. The investor takes this risk and obtains a similar risk/return profile as a reinsurer.

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June 6th, 2019

CAT BONDS

Twelve Falcon Insurance Linked Strategy Fonds (ILS)
Twelve Falcon Insurance Linked Opportunities Fonds (ILO)

Insurance Linked Securities (ILS), also called CAT bonds, belong to a still young and relatively unknown asset class. The name refers to securitized insurance and reinsurance risks.

The sponsors of such bonds – usually insurance or reinsurance companies – try to compensate the financial damages due natural catastrophes. Through special purpose vehicles they certify the risks. Besides the classical sponsors, industrial companies which were particularly affected by natural catastrophes have also acted as sponsors in the past (e.g. Japan railway). CAT Bonds cover mainly the risks deriving from earthquakes, hurricanes or typhoons. The USA is the largest CAT Bond market.

An investor in this asset class takes the role of a reinsurer: if no damage occurs the investor receives a premium; in case of a natural event the damages will be paid with parts or all of the investment. CAT Bonds are almost completely unaffected by developments on the stock market and develop independently from traditional asset classes.

The Twelve Falcon Insurance Linked Strategy Fund invests in approximately 90 – 120 different CAT bonds covering different damaging events. The portfolio can be differentiated by region, natural event and damage amount. The fund was launched in 2010 and is being managed by an experienced team in Zurich. Liquidity is weekly.

The most eventful natural catastrophes since the fund was launched were the Tohoku earthquake in 2011 (Fukushima Coast in Japan), Hurricane Sandy in 2013 (US) and Hurricanes Harvey and Irma in 2017 (US).

2017, with Hurricanes Harvey and Irma in the US, was a bad year for CAT bonds. The Fund (ILS) was unable to fully compensate for the losses incurred and lost -2.26% over the calendar year 2017, and as much as -16% in the short term.
You can read the performance development of the individual years HERE.
However, past performance is not an indicator of future performance.

As the asset class is independent of traditional investments such as equities and bonds, CAT bonds contribute to the diversification of the portfolio and can be seen as a satellite investment within the framework of the core satellite strategy.

The securities are nevertheless subject to risks. With CAT Bonds, you participate in insurance premiums and must expect a partial or total loss with CAT Bonds if damage occurs. The investment takes place in a very narrow market segment. Under certain market conditions, it may be difficult to find a buyer for these securities at short notice. Contractual partners (sponsors) can also become insolvent and can no longer or only partially settle outstanding claims of the fund. This results in a reinvestment and price risk.

This information cannot replace a consultation. The sole binding basis for the acquisition is the key investor information as well as the sales prospectus and reports.

The Managers

Twelve Falcon Insurance Linked Strategy Fonds (ILS)
Twelve Falcon Insurance Linked Opportunities Fonds (ILO)

Strategies are being managed by Sandro Kriesch and Daniel Grieger, two of the founding partners of Twelve Capital Management.

Sandro Kriesch von Twelve CapitalMr Kriesch started his carreer as a catastrophe modeller at Swiss RE in 1996 to later become a CAT Bond portfolio manager at Horizon 21. Mr Kriesch graduated with an MBA in geophysics from the Rochester University in New York.

Florian Steiger joined the portfolio management team of Twelve Capital in May 2017 with a principal concentration on Catastrophe Bond strategies.
Florian holds a B.Sc. degree in Management & Finance from the European Business School in Germany.

Mr Kriesch started his carreer as a catastrophe modeller at Swiss RE in 1996 to later become a CAT Bond portfolio manager at Horizon 21. Mr Kriesch graduated with an MBA in geophysics from the Rochester University in New York.

Mr Grieger also started his career with Swiss Re, then became a consultant at BearingPoint and a CAT Bond portfolio manager at Horizon 21. Mr Grieger graduated with a BA from the University of St. Gallen.

About Twelve Capital

  • Independent specialist insurance investment manager, now with AuM circa USD 3bn
  • Experienced insurance investment team with complementary skill sets coming from sourcing, analytics, portfolio management and risk management
  • Covering multiple Insurance investments such as Insurance-linked Securities (Private ILS & Cat Bonds) and Insurance Debt (Insurance Bonds & Private Debt)

  • 40 employees with excellent multi-year track record. Recent hires in finance, operations, credit and legal analysis, sales & marketing
  • Swiss regulator (FINMA) authorized and regulated

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